Investors often get locked into self imposed valuation trap windows. Using the current share price or recent share price history, rather than market comparables for determining value.
I don't think it useful to guess at a value as a multiple of current share price, or just "pick a target". Instead, ask a few questions... What else like this is out there in the market ?
With NXCO that drives you to note that there really are three businesses here. One I don't really care about. The two I do care about... the network security business and the anti-piracy business... really are pretty different from each other. Either one of those businesses is likely worth a whole lot more than what the whole company is trading for now...
The network security business is one that you "ought" to be able to develop a comparable for. The problem you'll have in doing that is that there isn't another company doing exactly the same thing they are... and the market potential is so large for a small company that when you DO use that to compute a value you also have to begin thinking about the company differently... as a high tech network tech company and take over candidate instead of an anti-piracy operation that will likely be valued based on a "get amnesty" revenue model. What is the market potential of the network security business? How many laptops does the government buy each year? How many will they buy JUST because of the new network security feature ?
I'd guess there are a lot of corporate users who could use the same features for the same reasons.
Right now I think the network security business is not being valued at all... and the entire valuation is based on the history of PR related to the anti-piracy revenue model.
Again, are there comparable businesses out there you might use as a comparable in determining market values ? I don't see any. Recent competitors haven't faired well because their technology failed them and their customers. Certainly, having your anti-piracy security firm get hacked and having your e-mail with them posted on the web... is likely to make NXCO a more desirable supplier to the industry as a function of their "other" businesses reducing that sort of risk.
Am I missing something? What are you using to try to decide what the value here might be ?
