Replies to post #53158 on Verus International Inc (VRUS)

[Renegades17]

Follow up point

Anshu made this comment in the last earnings release:

“We have the funding right now through our trade financing to achieve annual revenue of close to $20M if everything falls into place, but clearly that is just a small measure of what we can do with more capital to deploy. While our newest contract has flexible financing and can expand to meet our customer’s needs, our legacy contracts are performing at a maintenance level pending different forms of additional financing. So, our focus is on strategies that will unlock these sources of revenue as quickly as possible.”

Now, if bunnyslopes doesn't believe in the guidance, then that's fine. That said, the author of the post with price targets took a perfectly valid approach to figuring out price targets. Markets are supposed to discount FORWARD estimates in determining valuations subject to a high degree of uncertainty. It's obvious that the degree of uncertainty applied to Verus is extraordinarily large, but that offers a margin of safety too. Once some of the uncertainties are resolved, the gap between price and value should narrow.

[asymmReturns]

My argument...

"Your argument would suggest that trailing revenues are all that matters in valuation"

Totally disagree. What my argument actually suggests is that taking a normal reasonable projections approach for this company is a composition error because the level of uncertainty around a company such as Verus is considerably greater than companies with even, say, 8 quarters of consistent growth and performance. That approach in time with a couple of execution notches on their belt? Sure. But the uncertainty around this early-stage company is so great that it is unclear that even with the trade financing around this potential revenue, that it will all be captured as value in the company. The assumption in that model was that it will all be achieved. Hopefully so, but there has been enough doubt and missed timelines I'm suggesting that the market will not begin to price in forward revs until confidence in management's promises is developed a bit.

And since the results in the most recent 10Q are for the period ending July 31st, we literally have no idea what revenues for nearly 6 month's worth of (hopefully growth) actually are. Which is why I made that original comment. It's a wet finger in the wind.

I'm comfortable with uncertainty. I'm uncomfortable assuming that any team nailed execution 100% under the circumstances Verus faces.