Mad2,
The press release announcing the joint venture with Swedish Match was intentionally vague at the request of Swedish Match. They didn't want to give competitors an advantage by showing how far along they are or what markets they will pursue. You have to read between the lines and do more research than the press release to understand this. Smart investors don't make decisions based solely on a press release. Plenty of information is available to those who dig for it, and I'm definitely not referring to material non-public information. IMO, the joint venture will have a product on an international shelf within three to six months.
Domestic sales of Zicam for the common cold might ebb and flow but this will be mitigated if Zicam is shown to be effective against allergies. Consumers have told the company that Zicam alleviated their allergy symptoms and the company is planning to conduct a clinical study to determine the effect that Zicam has against allergies. My research indicates that there is a link between allergies and ICAM-1 receptors in the nose, so it is plausible that Zicam will prove to help allergy sufferers. In addition, people get colds year-round, and it is always the cold season somewhere in the world. Also, US retailers don't wait until the last minute to stock products for the cold season. They will place orders in the fourth quarter for the beginning of the cold season here. The only possible slowdown in sales of Zicam is the third quarter, and if Zicam helps with allergies, it probably wouldn't even slow down that quarter.
You said "this thing with Swedish Match could help GUMM, however not enough to justify GUMM's valuation"...would you please post your estimate for next year's earnings? Otherwise your statement is much too vague. Based on my estimate for next year, I think that the stock will trade between 40 and 60 in the next six to nine months. This is based on my estimate of about $2.20 per share and a PE of 20 to 30. This estimate is conservative IMO, and the company could easily exceed it. In addition, the market could assign GUMM a higher PE than 30, which I also feel is conservative given their growth rate.
<..and to the extent they need additional funds they will likely get them through the issuance of stock and warrants under favorable terms (ie dilutive to existing equity holders).>
Gum Tech doesn't need any additional financing right now and I seriously doubt if they will issue more stock. They don't need the money so why would they? Some warrants and options are outstanding that will come due over the next year but everybody already knows this and the number of shares isn't significant. It is approximately 10% of the current float which is small compared to the growth that the company is experiencing.
Regards,
Dan |
