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How do you value biotech companies with very little information ?
Guesswork really but nonetheless I have had a go...
2023 full year, (hopefully unless it s a little later with more delays caused by Covid) will be their year when at least in theory everything is imported, installed, built and up and running.
Craig's plan is to hopefully double 2020 sales by 2023. If this plan is not delayed and assuming everything works out then that might lead to a doubling of 2020 profit by 2023 which on the expanded number of shares on issue works out to be almost exactly 3 cents per share.
One idea to value the company which, (in the absence of any real data to the contrary), I have used to value PAZ shares for a possible reentry is to choose an appropriate PE multiple for those possible 3 cps earnings in 2023 and come up with a theoretical valuation in April 2024 when the 2023 result is announced and then discount that back to its value today using a discount rate that's appropriate given there are no dividends, the biotech sector is high risk and there is very limited liquidity.
I won't post the answer that gave me today because it would be insensitive to shareholders and its my own methodology in terms of the PE, the discount rate and the reasons for those numbers. Suffice to say its materially south of 71 cents otherwise I'd be buying the shares on offer at that price or bidding somewhat lower. Provided people have heaps of patience (not my strong suit), they should do okay but biotech companies are notoriously high risk and we are in unchartered waters with this pandemic and its duration. Just a few random thoughts I had on this one today. My ponderings are little more than somewhat educated guesswork, time will tell.
P.S. You can get almost any answer you like using my methodology depending on what numbers you choose. For example if you think the correct PE of PAZ in early 2024 when they have announced 3 cps in earnings is 60 then its worth $1.80 in March 2024 and if you use a discount rate of 10% for this being 2 1/2 years hence from here you get $1.80 x .9 x.9 x.95 = $1.24 now.
On the other hand if you think Covid will delay things 6 months and a fair period to make 3 cps is three years hence from now and a fair PE is 27 and your discount rate for the risks mentioned is 17% per annum then the fair value becomes 27 x 3 = 81 cents x 0.83 x 0.83 x 0.83 = 46.3 cents now.
Conclusion - People have to come up with their own numbers and reasons for them. If anyone else has a theory on how to value this company with such incredibly scant information I am all ears like this...yes I know that's a Bassett not a Beagle :)
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