Carl: I am not sure about an acquisition. Putting my M&A hat on, I have grave difficulties justifying a very high price. Let say that I am optimistic and I say this company has sales rate of $120 MM/year (twice the last six months sales rate), If I remember correctly, they have now about 18 MM shares (counting all options, but correct mwe if I am wron, since I am working from "weak" memory), so at $10/share, I would be paying $280 MM for this company (I will have to pay off the $100 MM in debt this company has). I would also be paying about 6 to 7 times book value (which is really overstated and actually negative).
No, as an acquirer, I would not want to damage my own balance sheet, I think the play is more on expected improvement in earnings than an acquisition. The question is, are such improvements expected? I know not. I expect the stock to drift back down to the breakout at 8, and if it holds, it means that company has turned the corner and is becoming a safer investment than it was about a year ago when they started with this acquisition.
Zeev |
