Originally Posted by
Lewylewylewy
Just spitballing half-baked ideas here:
I've been re reading the reports and giving this some more thought. I think we over paid.
The reason i say this, is that it'll take another ~$7.5m contract to reach break even (doable), giving an extra ~$3m on the ARR for the year. The following year could be the same. Assuming no additional cost, that's $3m profit before tax. They probably are carrying a tax loss, so let's be generous and say that it's $3m NPAT.
At a PE of 25, that's a MC of $75m. About where the SP is now. If we say that the SP is always forward looking, then today's value should be a MC of $75m.
I use a PE of 25, as a PE of 20 assumes that 100% of NPAT is paid out as dividend, with the share yielding 5% ROI, plus 5 PE because it's a growth share. (Maybe the PE should be higher to consider the following years growth, or lower because the assumption of paying out 100% of NPAT is unreasonable? Perhaps the PE should be between 15-25?).
Linear future growth prediction below:
The following year, they may get $4m NPAT (say ~$6m ARR with no tax losses left), then ~$6m NPAT, then ~$8m the year after.
Unless sales increase, i think it's double your money at today's prices in 3-4 years, not in 1-2 years as I had previously predicted.
So today's price, i think is ok buying at $0.54, but they really need to continue to grow rate of sales in a non linear fashion to make this thing worthwhile. Probably need to do a bit more work on calculating an appropriate future PE to justify that.