It could trade at $9 if combined EBITDA continued to increase by 50% per year - ie $11.7m last year, $17.5m this year, and $26.3m next year. After two years, if WCG traded at an EBITDA multiple of only 5 it would be worth $131m ($3.10 per share), at a multiple of 10 $6.25 per share, and a mutliple of 15 $9.40.

There is of course the assumption that earnings growth will continue at the rate of recent years, and that the ASX stays reasonably buoyant. The $11m debt WCG took on to buy all of WC may constrain their expansion this year. But WCG has strong cashflows, so should be able to pay this debt down quickly and continue expanding. WCG will not have a full 12 months from WC this financial year, but will in FY06. Also, WCG does appear to be winning substantial new business.

Even if WCG only achieved half the assumed growth rate (ie 25%), it would be worth (on an EBITDA of 10-15) between $4.35 and $6.50 two years from now (three to five bagger).

Out To Lunch, glad to hear you picked up this co when it was only 37c! IMO they are as good value now as then - because then Web Central was not too profitable, now WCG has acquired all of WC, and other IT stocks have rebounded strongly.

IINET has a market cap of $242m - it earned EBITDA of $22.4m in FY04.