Great DD going on here. It's good to take the cautious approach.
Any kind of share dilution makes a shareholder cringe. Whenever employees get shares in lieu of cash, they have to cash them in to pay the bills. Do you think a few of these shares are being unloaded here now? I have a tough time buying into the MM's playing massive short position games with a company that's performing like this one. I think its suicidal.
Personally, I feel that DRG conservatively makes a net profit of 10-15% from current products. However, with the huge growth, this money is being put into new products. In fact, I think the new product opportunities are so abundant that they are overwhelming the management. To take advantage of these products, and secure patents, etc., dilution is essential. I say take advantage of these opportunities. Here's what I think is a realistic scenario:
Authorized shares increase to 200M. Over the next two years, these are used for infrastructure and product procurement. 2010 Revenues top $200M with a 15% net profit of $30M. This is 0.15 E/S with a company that is still growing at a minimum of 50%. Reverse split at 4 to 1 takes the company on the NASDAQ where it gets a 20 P/E and trades at $12 a share.
So, if you had 40K shares today at 0.04, initial investment $1600, this would turn into 10K shares at $12 or $120,000, or 75 times your money, using scenario above.
Bottom line, there's a lot of growing pains and share dumping that will happpen along the way, but I love this play long-term.
Carl
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