VSBY Investor Partner in a Canadian Software Company
I have hundreds of thousands of shares of VSBY, and I thought I would share why I haven't sold a single share on this pullback, and I have added everyday during the last few days at around $1.40 CDN. The secret to trading long is to know what you own, so you don’t give it away when it pulls back. The average price of my current holdings is over a dollar, so I didn't get my shares from the shell or super cheap, I've recently bought them, like most of us here.
I am a partner in a Canadian software company so I am quite familiar with software as a service and its valuation in the market. Have a look at the EV/NTM chart, where the valuation has an average Market Cap of 50 times the next twelve months of revenue, and increases with the growth rate of the trailing twelve months. VSBY is growing at a rate which is off the scale.
I bought all the way up into the $1.60s because fair market value, as long as they continue installations at 100 to 150 stores per week is $4, minimum. So the trading support floor is, IMO, ABOVE the YTD high, not way down here in single dollar land. IMO, VSBY is severely undervalued because there are no analysts projecting targets and setting fair market valuations yet. The weekly chart sets the trend, which is trending strongly upward in a manner reflective of a price correction. It sold off recently because it was above the Bollinger Bands, not because it was overvalued. Now that the overbought status is back to normal the daily chart is ready to continue its upward trajectory, sparked by the next news event, which I expect to be monstrous, unlike the last one, which was just a "pleasant surprise out of left field".
Here are my calculations of fair market value for VSBY from someone in the SaaS industry:
If the SaaS model, which is applicable to VSBY, is used to calculate enterprise value (ie Market Cap) as per the chart above, then approximately 50x would be a fair multiple to use.
For each 1M in contracted revenues (bookings) added to VSBY's revenue line, this translates to 50M / 175M shares outstanding = $0.286 increase to the share price.
If the current run rate according to order bookings is $14M over the next 12 months, which is quite conservative, the valuation of VSBY at a 50x EV/NTM SaaS model, is $4.00, not the measly $1.40 where it closed today. See why I’m buying?
The shorts want us to believe that with 5000 stores done by the end of the year, VSBY gets $50 /month = $600 / year * 5000 stores * 50 SaaS multiple / 175M shares outstanding = only $0.86 per shares... this is close to where the shorts were short selling VSBY in a big way a few weeks ago.
The shorts didn’t factor into their story that according to contract, VSBY gets a 30% cut on the media revenue which, according to CEO Jay Hutton, is 20x the per cooler SaaS licensing revenue! Do the math, I almost don't want to post it, but it equates to $18.00 / share at a 50x multiple. Too good to be true... wait for it … and let the street decide the multiples to assign to each revenue stream within VSBY.
Next year, the ABInBev contract adds another 15000 stores to the equation. My calculator says $48 / share at a 50x SaaS multiple. Yes, get excited about what you own. If the street only gives it a 20x multiple, our shares should be worth over $19, so why sell your shares for $1.40, just because you don’t know what you own.
Crazy, yes, holy smokes, Vis-Baby! Revenue growth is revenue growth, and will be rewarded as the bookings are fulfilled, and the billings hit the books.
Key number to remember here, from this post is that for every million per year SaaS revenue added to the books, the stock should move up $0.286. Multiples for the IaaS and Media revenue need to be researched. SaaS revenue is $600/year per cooler. Do the math.
