Bravada International Ltd (BRAV)

[Beezerr34]

I think I'm going to change my name to Beeper now. Anyway, about the valuation question. We haven't quite gotten to monthly sales equalling market cap; that would be pretty crazy. If the PPS stays where it is and Q4 stays on this pace, then BRAV would be pretty close to quaterly sales equalling 50% of our market cap. That is still obnoxiously undervalued. We also have to keep in mind that our gross profit margins are close to 70% here. Ok, without getting into all the boring different valuation methods and such, I'll try to give a brief overview. A developed, well established company that has a small growth rate will trade with a Price to Earnings ratio. Very simply put, if a company trades with a PE of 40, then that means that the company's market cap. is 40 times higher than its ANNUAL earnings. Usually, established companies that can still maintain a decent growth rate percentage will trade with VERY high PEs, while large companies that are not growing quickly will have lower PEs. For example, Lulu trades with a PE of 45-60 while GE trades with a PE of 10-14. The growth rate is SO important because the market trades on a forward looking basis. Now, with all of that said, a company that is ONLY growing cannot trade accurately with just a PE because the company is reinvesting almost everything into its own growth. A lot of other metrics can be used at that point, and some of them can get pretty complicated. The two that are probably best suited here are a PEG ratio (which is similar to a PE ratio but it factors in growth), and just a straight revenue multiple. Valuations are my forte when it comes to the market, but I'm finding that trying to do a good job of explaining it through typing is quite difficult. Maybe I can do a better job of explaining it by just giving some examples that may help to put it in perspective. Let's say that BRAV posts a 200k profit in Q4, keeping in mind that that number can be misleading due to BRAV reinvesting a lot of what it has into its growth. A 200k profit for the 4th quarter gives BRAV 800k in annual profits, and remember, that is not factoring in any growth rate. If we apply a PE of 40, and BRAVs PE at that point would most certainly be higher because it's growth rate is simply staggering, then that gives us a market cap of $32 million. Any growth above and beyond that would have to be factored in. The other way to possibly put it into perspective, like I said before, is to use a straight revenue multiple. For example, Lulu trades with a revenue multiple of about 7.5. (That is based on their 2010 annual revenues and their average PPS around that time.) Usually, revenue multiples are higher for companies that have high gross profit margin percentages and high overall growth rates. If we use 7.5 as the revenue multiple for Bravada, then, using Danny's lower end number of $6.1 million for 2012, we come up with a market cap. of about $45 million. Keep in mind that BRAV's revenue multiple would most likely be higher because its gross profit margins and its growth rates are higher than Lulu's. Bravada's current market cap. is $2.88 million. In conclusion, many people are probably wondering why Bravada isn't already trading at a much higher level since markets trade on a forward looking basis. Well, this is a pinksheet and it just doesn't have the exposure that all the bigger stocks have. Also, Bravada just VERY recently crossed over into a completely new realm of revenue and value. It may take the pinksheet market a little while to digest and even believe that what is happening is real. When that happens the market will most likely correct itself violently and quickly. I hope this makes sense and I hope it helps. It was a lot of stuff to try to put together in writing, but I do really hope that it helps some to understand valuation just a bit better. By the way, Bravada is insanely undervalued.