Replies to post #10472 on Looksmart Limited (LKST)

[texas4qld]

Yeah for sure, it's a combination of things.
Look at Looksmart, $50 million in the bank and not even a wiff of a Div.....and yet the market loved them, because of potential growth in the sector, new deals, exciting advancements in technology etc etc.

SNN will be a market darling, but traders want to see brokers giving the stock the thumbs up......can anyone here give me ONE stock with similar market cap,rev's, and profit margins ?
I was surprised with the Div today, and even more surprised that the market didn't chase it......but lets see how things develope over the next few weeks ;-)

Cheers Tex.

[Ollie]

Just some coments on LOOK....


• Insights: Given the above earnings and discount rate, LOOK must grow earnings at a rate of -10.5% annually for 10 years to justify its current stock price of $1.51. You can adjust the earnings growth rate and discount rate to see how they can dramatically alter LOOK's intrinsic value per share.

• Walk through: If we assume initial earnings of $38.6 million grow at a rate of 34.70%, and we discount those future earnings at a rate of 17.00%, we arrive at a net present value for the company's next 10 years of earnings of $908 million. To account for potential earnings beyond the 10th year, we estimate a growth rate of 6.00%, a discount rate of 12.00%, and we arrive at a continuing value of $2.79 billion. To complete the calculation we add these two figures together, subtract the long-term debt for LOOK ($1.00 million), and divide by the outstanding shares (107 million) to get a per share intrinsic value of $34.57.



Now the intrinsic value of LOOK is far fetched since they lost almost 70% of their earnings from next year, but with the search industry growing so fast, I find it hard to believe that LOOK's earnings growth will be in the negative 10.5% for the next ten years to justify current price.

Any comments welcome.