Mark, excellent work.
But then I suspect you had a new Energizer in that calculator! Two points: first, your estimate of $20 mill in OraTest revenues seems very reasonable if we're talking a full 12 months _after_ FDA approval. Failing to do that would mean a failure on ZILA's part to capitalize on the franchise opportunity this product represents. Second, your estimate of 4.6 for a price/sales ratio seems conservative for the very reasons you mentioned. I think Barnes' figures of 7.5 is, as he said, pretty rich. But I would be very dissapointed if the stock fails to reach a multiple of at least 6.0.
I'm going to try and estimate the stock's price 12 months after FDA approval and possibly 24 months out. But PLEASE don't throw any sharp objects as I, too, am an amateur and all I have is an old Casio calculator with a half-dead battery. We have 3 figures to work with: shares outstanding (I'm assuming 30.5 mill); expected sales ($56 mill in 1st year after approval) and 3 price/sales ratios (a conservative 4.6, a moderate 6.0 and a rich 7.5).
$56 mill sales / 30.5 mill shrs = 1.8361. Applying the 3 ratios:
4.6 x 1.8361 = $8.45
6.0 x 1.8361 = $11.01
7.5 x 1.8361 = $13.77
In the second year I expect a tripling of OraTest revenues to approx. $60 mill giving us total company revenue of $96 mill. or so. Using the same calculations:
$96 mill sales / 30.5 mill shrs = 3.1475
6.0 x 3.1475 = $18.88.
So the one-year price target is $11, the two-year target is $19, give or take. What could cause the figures to go south? Any number of things: 1. undue delay in getting FDA approval 2. company failing to reach sales goals 3. market failing to award a ratio of at least 6xsales 4. additional shares being issued,for whatever reason, thus causing earnings dilution. What could cause higher prices? Only two things: 1. company beating sales projections 2. investors falling in love with stock and giving it a much higher multiple. Either of these two events would cause me to smile broadly and happily admit I was wrong.
Your comments, please. But be kind as it is late at night and my crystal ball is dimming. Regards, Julio. |
