After looking at their financial, i just have questions about how they will finance such project. If they are to bring products to put at Walmart stores, they are not getting paid in advance. They probably have 90 days term or until products are sold then collect money 30 days, 60 days after?
Thier finance is bad from what I can see. Current Assets is $865K while current liability is $1.8 millions. Out of that $1.8 million they have $709K in Accounts Payable and $837K Notes Payable. Are the note payable convertible?
How will a company stay in business when have financial like this?
An as you all know that Inventory is $359K but when you need to liquidate them quickly, you will be lucky to get 50% of it. And it's a part of current assets. Also a bid part of current assets is "Advances" to G Harrs and J Brown. The total of $397K. I saw similar amount on Dec 2008 balance sheet as well. Those two borrowed money from the company? If the company needs cash in a hurry to pay the payables, will the two have money to give the company?
The financial statements raise lots of question to me about the company's ability to stay in business and reach its goal. I was very high on EXPH till the financial came out. What I expected to see was current assets was more than to cover current liabilities. I also total assets to be higher than total liabilities but it's not. It's $1.32 million against total liabilities of $1.93 millon.
The company stated in the last CC that the total revenue for this year to be around $4 to $6 millions. That's not included Walmart and Lowes' bids that was going on then. From the first qtr INCOME STATEMENT, I don't see how that could be happening. But if they were including Walmart and Lowes 's bids into that, it's possible to reach that number. So, did JD lie during the CC about $4 to $6 million without Lowes and Walmart projects?
He did mentioned during the last CC that Walmart and Lowes' bids are not as big of a part of this years expected income. So I am very confused on this and the guildence given during that last CC. And I hope this will be cleare dout during the next CC.
I looked at the Income Statement and I see that the company has Operating Income of 5.1% of the revenue. But after deduction of Interest Expense it left only 2.28% gain. Other Income is very questionable and I think it's from selling stocks.
Nevertheless, the company operated with net income of 2.28% of its revenue (discount other income).
If EXPH is to able to control cost like this and make $5 million in sales in 2009, 2.28% ratio will leave it with $114K in Net Income.
Now that I have time to digest the news and look at financial statement throughly, I have come to a new understanding and fundamental DD. Currently, the company is now have a market cap of over $13 million. That is very overvalued by my fundamental calculation.
What should I think the right price should be?
($114,000/980 million shares) x P/E of 15 = $0.0017 per share.
If I were to use NET Income of 5.1% giving that interest expenses is zero. The pps should be at:
Net Income from $5 million x 5.1% = $255K
($225,000/980 million shares) x P/E of 15 = $0.0039 per share.
I used to DD using 3X of sales revenue but this doesn't apply here after looking at the financial statements. This is because the nature of business and the extreamly low profit margin. So P/E is to be used instead of P/S. And anyone in strong financial will agree with my method here.
I have provided DD on stocks I am in, good or bad results from the DD come from currently data I have and expectation of growth. I didn't have Financial data before this DD. So this is my current DD and I stand behind it.
Having said that, PPS could go to the roof because it's more than fundamentals that drive the stock market. But for me, I am more of a fundamental guy because I believe at the end, it will be the most important fact to determine the PPS in the long run.
Until then, I will enjoy the MOMO.
I do plan to call in on Tuesday CC and asking many questions on the financial front regarding to those numbers on the Balance Sheet and few line items I see on there that raise my doubt of the company's ability to go forward without issuing shares/shares convertion (if those NOTEs under current liabilities are convertible)/increase in A/S.
Also I will be asking question about the current contracts that signed by Lowes and "possibly" Walmart of how the term of grace period to collect money. Furthermore, if he has taken into consideration that price of energy is verly likely to go up as we are heading toward the end of the year. You can probably see it at gas station now that price of oil is almost double from 3 months ago (probably when EXPH put the bid in for those projects).
On the side note, inflation is soon to come as you start seeing it all around us starting with mortgage rate and US Treasury rate. This coming week is a record high in US Treasury borrowing, over $200 billion in one week. In 2006, $74 billion borrowing would cover 3 months borrowing. Treasury has been borrowing at an alarming rate of over $100 billion a week and stalled last few weeks ... now resume again. Rates are going to go up as USD gets weaker. Energy price will go up as USD gets weaker and new Cap and Trade passes. At personal level, I hope you all prepare for what is to come and plan your financial accordingly.
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