News 
Market Data 
Discover
Replies to post #222150 on Elite Pharmaceuticals Inc (ELTP)
08/16/16 10:00 PM
Let’s talk about the business that is Elite. Why business and not p/s or market cap? Because it is what a company does as a business that will determine the actual long term value and p/s. With that, we need a little context…
What was the p/s in 2014 at the time of the poison pill that required a valuation analysis (which placed the value of Elite far higher than today, but let’s stay on point)? The answer is about 41 cents. What is it now? It is 16.5 cents. Seems ridiculously low, but an argument has been made that the p/s in 2014 reflected a lower number of outstanding shares. A fair observation, but a flawed statement about the financial viability of Elite. Pointing out the market cap of a company fails the test of context, as we know that investor sentiment drives the p/s and the argument that “the market knows value” really should be amended to say “the market is subjective” because the information upon which the buy/sell decisions and the ability to execute trades are asymmetric.
Which is why we need to take a look at some very clear and irrefutably non-subjective numbers:
• For the fiscal year 2014, Elite had revenues of $4,601,376
• For the fiscal year 2016, Elite had revenues of $12,498,332
o About a 2.7X increase
Simply based on revenues, one must question why Elite’s p/s is so low. And, before arguing there are a larger number of shares outstanding, I would suggest by that measure Elite is still under priced. How so? Let’s look at some additional numbers and do some simple math.
2014: Elite had revenues of $4,601,376 and total diluted shares of 526,880,118 (which are more than O/S, but less than A/S…THEY ARE SHARES ELITE IS RESPONSIBLE FOR PAYING OUT). The simple math is revenues divided by diluted shares. For 2014 the ratio of revenues per share is .0087. Are you with me so far?
2016: Elite had revenues of $12,498,332 and total diluted shares of 757,579,152 (again, these are more than O/S, but less than A/S…THEY ARE SHARES ELITE IS RESPONSIBLE FOR PAYING OUT). The simple math, again, is revenues divided by diluted shares. For 2016 the ratio of revenues per share is .0165.
Now, please feel free to check the math on the above. But, it is correct. So, what does that tell us? That the value of Elite based on very real sales numbers versus the diluted share count has increased today from two years ago by about 1.9X. So all the nonsense about dilution hammering Elite’s value is just that – NONSENSE! It remains that Elite is worth more today than at any time in the past 5 years based on revenues versus diluted shares. Irrefutable! If you want to factor in the tech/IP, Elite is vastly underpriced at its current p/s. And, should there be any question let’s use one more ratio that offers a clear understanding of Elite’s solvency at THE PRESENT TIME. The ratio is called the Current Ratio and tells us whether a company has liquidity (I should not have to explain that to investors). To be clear what we mean, Investopedia offers a great definition…
The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations. To gauge this ability, the current ratio considers the current total assets of a company (both liquid and illiquid) relative to that company’s current total liabilities.
