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Microcap & Penny Stocks : TGL WHAAAAAAAT! Alerts, thoughts, discussion.
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To: falcon74 who wrote (37930)3/20/2000 1:58:00 AM
From: TraderGreg  Read Replies (1) of 150070
 
Extending your post about RTIN's current P/E of 2($.875 price) following the Fatburger acquisition a bit further:

A P/E of 2 would be applied to a company with virtually no growth rate. Kind of like if Coke was being consumed by all 6+ billion people on the planet right now AND Coke's mgmt was doing nothing else but playing switch with bottle necks.

RTIN's goal of growing from 30 restaurant sites to over 700 in 5 yrs is a growth rate of 88% per year. As optimistic as this sounds, keep in mind there are players who are looking for REGIONAL exclusivity. So, it will be OPM that will help grow the chain. But let's whack RTIN(after all they are just a BB right?<g>) and say they only get to 100 restaurants in 5 years. That's still a growth rate of 27% a year.

Now, a lot of stocks are assigned CURRENT P/Es that are double their growth rate. But let's use just HALF that reduced growth rate. That gives us a P/E of 13.5 on the CURRENT stock.

So, even if they have a chain size that grows to 85% FEWER restaurants than their goal(100vs700), with a P/E that is one half of this reduced growth rate, the stock should be trading RIGHT NOW at 13.5/2 x $.875 or a tick or two below $6.

Yeah, I'll stick my neck out and say the stock is a bit undervalued right now.

TG
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