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Monday, December 05, 2011 11:51:16 AM
VALUATION AND CONCLUSION
In our view, Scorpex, Inc provides investors with a very unusual opportunity: a company in the waste disposal space that
is positioned to generate substantial top-line and bottom-line growth. In addition, investors benefit from the fact that the
stock is trading at a puny multiple.
We strongly believe that Scorpex will reward investors and command a premium valuation given its dominant market
share in a high growth market and its high profitability due to its model. Most companies in the space are generating slow
growth in revenue and focused to a large degree on operating efficiency. Nonetheless, stocks in this peer group, such as
U.S. Ecology (NASDAQ – ECOL) and Clean Harbors, Inc. (NYSE – CLH) currently and historically trade between 16 –
22x forward 12-month EPS.
Our 6-month price target of $4.00 is based on roughly 40x our FY12 EPS forecast, which is reasonable given the
expected financial performance and dominant status. As the Company gets closer to launching, the stock should begin a
sharp upward trajectory toward our target. Moreover, we project that SRPX will reach $8.00 in the next 12 months. Twelve
months from now the stock will be valued based upon forward-12 month EPS, or FY13 EPS estimates. One year from
now, $8 will equate to 20x FY13 EPS projections, which is the average historical forward 12-month P/E for the peer group.
Given its much higher growth rate, the stock could even approach $10, depending upon volume and net margin
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