snup, just when I get to the point when I think I am done posting here you make that comment and I think it may be worth continuing, as I try to provide a real business perspective. By the way, since I am posting, I have a few questions...
Remember when the discussion centered around how to value Elite? Remember when the valuation that WAS done by Elite was rejected as improbable? Remember when it was said that a DCF (discounted cash flow) should be done on Elite? Remember when I said that, because of the inability to provide guidance that relied on recurring revenues, doing a DCF was more art than science, as it would rely entirely on the subjective projections of approvals and peak revenues, aspects that are or would be in dispute? Remember when I said that, since it would not be on a firm financial foundation, it would be subject to the same argument as Elite's valuation; in no small part because no one could agree that the numbers were anything more than conjecture or imagination?
Well, guess what? Things changed and we just saw a 2.6X increase in Q/Q revenues. Moreover, we heard the CEO deliver a forward looking statement regarding what can only be labeled as "recurring revenues" going forward, and they are expected to triple and more over the next two Qs. Well now, what that means is we can actually do a well-grounded DCF analysis and offer an interesting perspective. So, I did one.
I used an online calculator, rather do the calculations myself. I did so for the very reason Elite's valuation was rejected...because it needs to be seen and it needs to be as objective as possible. So, I worked through a few online versions to arrive at something that was easy to understand. It still required some subjectivity, as does any DCF model. For example: 1) what are the projected revenues used? 2) what is the specific time frame for the modeling? 3) what is the discount rate (usually it is about 10%)? In all areas, I sought realism and did not use a doubling of revenues over a short time frame or a lower than 10% rate. The effort was to avoid skewing the results and making them look too good. I wanted a realistic view of the DCF analysis, one I could be comfortable with supporting as a researcher.
What I found was interesting, and very comforting to me as an investor. I would suggest investors try it for themselves.
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