Replies to post #53156 on Verus International Inc (VRUS)

[Renegades17]

Distinction between market value and intrinsic value

We know the run-rate revenues and that particular post was deriving price targets based on different revenue multiple assumptions inclusive of the $12mm contract only (ie. factoring little incremental recognition of the prior backlog). The sell-side community sets price targets based on far less information and more dubious assumptions all the time. Valuations are inherently uncertain, but if you wait for the uncertainty to resolve itself, you'll oftentimes miss the biggest part of the potential gain.

If you disagree with the assumption, which I believe was fair and based on management's guidance (again, the market bases valuations on forward guidance as a standard practice),that's your decision. The market offers you the opportunity to sell and deploy capital elsewhere. Your argument would suggest that trailing revenues are all that matters in valuation. I totally disagree with that. If that were true, all biotech stocks would trade at their net cash values adjusted for expected burn rates. That obviously isn't true.

The fact that the current price isn't reflecting the backlog and revenue potential could be attributable to a myriad of factors. First, we're in a bear market and small-cap gets particularly hurt in those conditions. Fear is trumping greed at the current time and that may persist for some time. Second, there is very little institutional involvement in OTC stocks to support prices and valuations. OTC stock price setters are primarily retail investors that have very short attention spans and trade off of news flow or technicals. That offers the opportunity to purchase shares at substantial discount to intrinsic value.

So while it's obviously true that all we know are reported financials, it's also true that valuations are based on forward looking estimates, not historical financials.