Avid Bioservices Inc (CDMO)

[stockaxe]

Forget revenue multiples. Here's why it is attractive in an objective way. Probably within 24-36 months, the company will be doing $350mm of revenue, probably with EBITDA margins of 35%. That's about $123mm of EBITDA, and with very little annual capital spending to maintain that. That's why businesses like this that are growing trade at higher multiples...because they can grow organically, have sticky businesses, and don't require significant capital to maintain business. It would not be crazy to see that trade at 25x EBITDA, and in fact many of the biologic M&A we have seen has been in that range. As an example, CTLT trades at about 20x and has far lower growth over the next few years than Avid. Additionally, CGT has a faster growth rate and better market dynamics, justifying an even higher price (note the 9x Thermo paid...that alone would mean the CGT business at Avid is worth ~$11.25/share). In any event, 25x the $123mm of EBITDA is worth about $38 today at a 10% discount rate. That also ignores any cash they generate between now and then, and any potential new investments they make which are proving to be value-added (CGT spending $75mm to create hundreds of millions in value.) So that's your objective answer. That doesn't mean it can't have a rough quarter here and there, but if they execute on this pathway, the stock is very cheap today and should trend to the high $40s or even higher over time. Now your friend doesn't have to wonder anymore.