Dr Bill: You forgot one vital piece!
Global Oil Tools was acquired in early July of 2005. There are two very simple ways by which we can easily account for its contributing portion of the potential share price:
1) Consider their purchase price ($4.5 million) as part and parcel of GFCI's potential market cap -- that is, assign the purchase price per current share as partial contribution to the potential market cap for all of GFCI, such that the $4.5 million on the 39.68 million shares o/s gives a contribution to share price of about 11.3 cents per share. But this fair market valuation is being based upon the purchase price of a private company, which historically tends to be about 1/3 the valuation of the same exact asset as a public company. Thus, we're talking the potential of a 34 cent contribution.
2) Consider an average run rate of $350k per month in revenue (according to Kenner's visit with Brian Barnhill at Global in December) for all of 2005 and their approximate 15% net profit margin (again, as per Kenner's visit), which gives 15% of $4.2 million revenue, or $630k in earnings, on 39.68 million shares o/s, or an EPS of $0.016. Now, let's assume a TTM P/E multiple of 24x (median multiple for this sector), and this gives us the potential of a 38 cent contribution.
Using these two very simple methods gives us quite surprising results. As a matter of record, I am exceedingly amazed that these two very different methods resulted in two very similar results. It lends some credibility to the numbers, as well as the methods, I think.
Any arguments?
Been_Burned_Before