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Technology Stocks : BillServ.Com(BLLS) Going for the EBPP Market Small Billers
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To: TLindt who wrote ()10/9/1999 10:21:00 PM
From: Paul S.   of 918
 
Interesting valuation theory!

Posted by Av12 on the Raging Bull

Charles, net valuator says BLLS $20 stock.

In an earlier post I asked about valuations, I came across this equation that will help us.

msb.edu

This calculator provides a quick method to estimate what a rapidly growing company like an internet company might be worth today. It is based on the assumption that someday the Net company will "grow up" and become a mature company with predictable profits and growth that we can then value with standard pricing models.

In order to use this calculator, you need to forecast what the company will look like when it "grows up," along with how long it will take the firm to reach that point.

Tha calculator requires 7 fields: Probability of Success, Revenue When Firm Matures, Profit Margin, PE Ratio, Number of Shares, Discount Rate, Years until Maturity.

The factors I used were:

Probability of Success. - 75% or .75 justified by amount of clients signed in short period of time.(already control 1% of billing mkt)

Revenue @ Maturity. - 100 million (from your last post)

Profit Margin - 10% (very conservative)

PE Ratio - 120 ( StockSmart quotes the average multiple at which the Internet Products & Services SubIndustry is priced at 253.3 X, Yahoo has a PE Multiple of 480.3 X as an example)

# of Shares - 30 Million ( take the 10 Mil currently OS, add the PP of 2 Mil and warrants of 2Mil then double it)

Discount Rate - 10% or .1 (A value of .10 is a reasonable guess as to the appropriate discount rate for today's stock market)

Yrs to Maturity. - 4 years.

Here is how the model works. First, it calculates the value per share of the firm in the future after it grows up

Price_in_future = Revenues_in_future * Profit_margin * PE_ratio_in_future.

Then we discount to today's value by taking into account the probability of success, the discount rate, and the number of years until maturity.

Price-today = Probability_of_success*Price_in future /(1+discount_rate)^(number of years until maturity)

THE CALCULATOR ESTIMATES TODAY'S VALUE PER SHARE AT $20.49
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