ynot - You are so wrong!!! gg
At low 20's, say $22.50, RHAT will have a market cap of about $1.5 billion. On revenues of $10 million last year, maybe $20 million this year if they do well.
Let's say they double revenues every year. Say they make 20% EBIT margin. At what point in time will a market cap of $1.5 billion be justified at, say, a 40 times PE, say a 25 times EBIT multiple.
Answer, 6 years out when they make $64 million EBIT on $320 million of revenues. Now, discount that back for time value of money (8%). Makes it worth about maybe $15 per share. Now discount that for the risks involved in getting from here to $64 million EBIT. Want to give em a 50% shot? Say $8 per share.
Therefore, RHAT is worth $8 per share if they have a 50% chance of growing 100% p.a. for 6 years and achieve 20% EBIT margins.
Doing the same exercise at $70 per share, you got to discount time and risk, so it's like a $280 price if 10 years. For that you gotta grow 100% for 10 years.
I could poke about 43 holes in these arguments too, but the picture is pretty clear to me. Of course, it's equally clear to me on many internet stocks, and that didn't save me from losing my shirt on AMZN.
La plus ca change.................... |
