Good evening Huey, I'm just catching up...very long rant here fwiw
re Fundamental Analysis...gosh, you make it sound that elon is about to go out of business (gg). We agree that it's important to look at the Fundamentals and we've each demonstrated that it's easy to pick out the statistics that support our points of view. It's been said before that "...what counts can't always be counted, and what can be counted doesn't always count" (or something like that). Personal valuation exercises are inherently subjective, and I imagine you'd agree that for any comprehensive analysis to be valid, we cannot only look at the numbers. As the world becomes increasingly digitized and networked, the need for sophisticated, interoperable control networks, in many markets, is imho, inevitable. ELON has the lead, they alone have the IPR, the products and the partners.
book value per share, admittedly no longer a popular valuation measure ....and for good reason, simply stated, book values do not properly represent tech companies most powerful assets...their IPR. Here is an article that addresses these issues and that argues that such assets are better reflected in the share price. It makes an interesting read imo. fastcompany.com
Since ELON has never had any retained earnings to add to equity, equity is low. Let's consider some intangibles in this respect. Long gestation periods for breakthrough technology are not unknown....witness CDMA being developed many decades before QCOM'S commercial implementation and success. Consider that eleven years ago, long before widespread public use of the web, these people began working on open, interoperable distributed control networks, knowing full well, I assume, that the fruits of their labor would take many many years to ripen. The Board and Management here are all very experienced players and from what I can tell there is a very low turnover rate amongst key employees. These people seem to be in it for the long haul.
Elon is enabling new paradigms, and is confronting initial markets with notoriously slow adoption curves due to the existence of entrenched proprietary technologies in what are often mission critical implementations. As they indicate in their comments below, to get this level of the infrastructure accepted as the de facto std, requires an extensive amount of time and the cooperation of a diverse variety of players. Elon's Control Protocol was developed quite some time before their proprietary architecture, was made available as an open std. When questioned as to why the protocol was not released sooner the company responds by saying.
With respect to ensuring interoperability, it would have been like jumping off a precipice into a dark hole without knowing what may be at the bottom....What is essential is overwhelming commitment to its 100% consistent use; even implied agreement for such use is not enough......In Phase I, we implemented a 100% consistent protocol in the Neuron Chip and subjected it to the test of elbow grease - real use - among early adopters. In Phase II, LONWORKS gained the overwhelming commitment for its 100% consistent use - 3,000 OEM companies and 4 million installed nodes*. What defines inter operability for TCP/IP is not that there is a spec, but that your implementation is a non-starter against your competitor unless you are 100% compatible with the installed base. No more, no less. Even 99% compatibility is inadequate. With its installed base, the LONWORKS protocol has enough commitment behind it to ensure 100% compatibility. If we had done this earlier, we could have ended up at the 99% point (* note these numbers have increased since this was written) echelon.com
Management here is conservative and forward looking guidance has always been prudent to the point of stealth. I have waited patiently, trusting that the iLon would be shipping at this time, that the market would recognize this, and that profitability and revenue ramp ups would only be a quarter or two away. As evidenced by recent announcements, progress here is being made at a fine clip. ...A key step for Echelon's Phase lll, identified as...unconstrained growth in new applications across the full range of markets....is dependent on...making LONWORKS technology portable...I understand that this is now possible and that not all announced partnerships will translate into immediate profits, since to get "LonWorks inside Honeywell", so to speak, will take a number of months. This is like money in the bank.
I am new to the G/K strategy and I may be completely off base, feel free to hang me by my toe-nails if what I propose is heresy. I do not claim that Elon is a gorilla (yet), but I did like Janet's conclusion that the company "is a very young potential gorilla with attitude".
You quote PSR's of a number of gorillas/candidates with greater revenue growth pointing to their lower PSR's being more reasonable. This is subjective, your judgment call. According to the authors of the GG the PSR is an indicator of a company's perceived Competitive Advantage which is in their words ..the primary determining factor for any company's stock market value. Perhaps the market is speaking...err, shouting. ELON is already priced at a level that implies remarkable current performance .....or, I would have to add, an exceptionally large Competitive Advantage.
Moore et al state clearly that the PSR must be seen in the context of the particular company/industry involved. More mature markets are expected to reflect lower PSR's compared to newer markets. You said: Many of the other companies I looked at were already in hypergrowth tornadoes (or had already experienced them), were significantly profitable, yet still sported PSRs lower than ELON's 54.21.......Part of ELON's business is in ?micro-hypergrowth? as defined by the rfm, and perhaps potential gorillas facing tornado formations on the horizon yield exaggerated PSR's through recognition of their first mover advantage, while the absence of "substantial" revenues in an immature market, tends to plumpen this ratio somewhat. This year should see profitability and the revenue growth you are looking for, with perhaps a concomitant reduction of the PSR.
I suspect there are shares on lock up and we will see a rash of insider selling as soon as they come off. What evidence suggests this to you. Elon's IPO lockup period expired last year.
I see Echelon still only rates two analysts: one with a moderate buy and one with a hold. According to Elon's CFO, confirmed to me in an email last week, there is only one Analyst covering Elon at this time...Paul Johnson, co-author of the Gorilla Game. He has an "Attractive" rating on the stock.
exercising options to buy at $1.40 per share and below, and then immediately turning around and unloading these same shares to the public at $40 per share......a nice million dollar plus gift at shareholders' expense...Quite frankly, and this is not directed solely at you, I am tired of seeing so much negative sentiment on the message boards being expressed towards insider sales. We all have access to timely information in this respect and the Laws in place ensure due warning to any astute retail investor. In many cases Insiders have sweated "blood and guts" and put in many hours over and above the minimum required to meet their job spec. How many friends do you have that moan about not getting "paid" for the amount of time they spend in the office. With public companies, the use of options addresses this issue, so why complain about it. Retail investors pride themselves on buying low and selling high, but look at this as a negative when done by institutions and insiders ...absolute hypocrisy in my view. I am glad that Beatrice made some money, she deserves it. I do not begrudge insiders, they often take big risks and their hard work might just pay off equally handsomely for those retail investors prepared to stay the course.
The public has had ample opportunity to pick up these shares cheaply, really cheaply, but this requires vision since the clues may not be apparent in the numbers. As a long term shareholder who watches Elon closely, Oshman's latest retail purchase in August last year of 52000 shares costing him north of $320,000 was a clear signal. Note that according to SEC documents Oshman does not draw a salary...I guess that's a good thing, I'd hate to imagine what the Financials would look like if he did!
Pure Gorilla Gamers are not "early adopters" by definition, this is essentially a conservative strategy aimed at securing high returns with low perceived risk. GG'ers will never enjoy first mover advantages since they will not take "Venture Capital" type bets where the risks are high, but the returns "IF one is right", and that's a very big IF, are profound. If one "get's lucky" once, one should be able to easily absorb other losses resulting from this type of behavior, assuming one's affairs are prudently managed. I am not recommending VC type investing....but I will take a 'bet' once in a while if I feel I can trust the management, if I believe in what they are doing, think they are the leader in the sector and see no imminent threat that might unseat their plans.
As always, one's picks and timing should always be commensurate with one's risk tolerance, and this is a very personal decision. I bought the "vision" early....it was the most compelling opportunity of it's kind that I could find at the time. Even if ELON doesn't become a fully fledged Silverback, or even if they fail, I imagine that I'll have plenty of time to exit gracefully with a "pocket full o' change".
Like any stock, ELON is priced a few years out...does it's current price represent fair value...that call is different for each of us, and is what makes the market.
Best of "Luck" Investing. Regards, David. |
