Bill: I hope you don't mind a little counter-point to your points. Not to debunk your points or say they are wrong, but to give another perspective.
I'll start with point 2, which is the growth rate of subscribers (mortgage brokers). If the website information is accurate, it is obviously a good sign. However, my original message on this thread was to suggest that particular market is limited. I believe the website discusses 23,000 brokerages and possibly 130,000 brokers. Do you really think that 100,000 of the 130,000 mortgage brokers in the country would subscribe to this service? If the service is so valuable that most mortgage broker firms feel the need to have it, wouldn't most just order one subscription? Does every broker in the firm need to subscribe?
Point 3. They plan to become a fully-reporting company this year. That is good, if it happens. However, I have yet to discover a non-fully reporting BB stock which doesn't plan to become a fully-reporting company "soon." Most also plan to become listed on a real exchange "soon." Often, neither happens.
Point 4, regarding sale of their product to retail customers (which is, I assume, where much of the $40 million of "projected" revenue comes from. Again, would be great if it happens. However, how many consumers would be willing to pay for such a service? I just refinanced my loan, and while doing so, I went to several of the FREE websites which provide comparisons of mortgage interest rates. From doing so, I was reasonably satisified I got a competitive deal. I don't really see myself paying for a service that you can get for free. Many consumers are probably just as interested in dealing with a company they know and trust as they are searching out the last 1/10th of a point in an attempt to get the best possible deal.
Point 5. Regarding customers wanting the best deal (same as response to point 4).
Point 6. Regarding growth cycle which could take them to 100,000 subscribers (same as response to point 2).
It seems that much of the projected growth in revenue is very speculative at this point, particularly the part about developing a retail product which, to my knowledge, has never been sold to a retail client. So what do we know? Assuming the website is accurate, we know they have somewhere above 2,500 subscribers paying somewhere in the ballpark of $50 per month for the service, a growth in subscriptions, but a limited market. Possibly a new (and potentially much larger market) if they can figure out a way to get people to pay for information which is now available for free.
Say the get 500 more subscribers per month for the rest of the year. Assuming 3,000 subscribers at the end of May, then there are 6,500 subscribers at the end of the year. Probably an average of 3,000 subscribers for the full year. An average of 3,000 for the year at $600 per year would equal a total of $1.8 million, or 9 cents per share of revenue. Assume the 40 employees (according to TMex) only get $25,000 per year in salary, and another 5,000 in benefits. Salaries and benefits would then equal $1.2 million, or 6 cents per share. Assume another $380,000 or 2 cents per share to cover non-salary costs such as office space (very expensive in the Seattle market), taxes, etc., and now you are down to 1 cent per share of earnings.
Yes, there is some potential for growth, but again, the size of their primary market is limited. And talk of a retail market is speculation, IMO, until they prove they can convince retail customers to buy their service.
Buying opportunity? I guess its in the eyes of the beholder. |
