<<I said nothing about WEBM's gross margins. I don't care about them. I did say that their growth rate of 300% was better than EXLN's 25%. I don't see what that has to do with gross margins.>>
You are right that the way I quoted you before the WEBM question did not present a coherent argument. Your full paragraph had been:
<<In regard to margins, the only things I am interested in are the free cashflow or earnings that are generated net of everything. Maybe some people find the gross margin useful, but according to my understanding of security valuation, it is quite irrelevant.>>
In these two sentences you say you are in favor of a good "bottom line". On the other hand you like WEBM but this is a company which still creates heavy losses: in the latest quarter $6.6 million on revenues of $15.6 million. I claim that very fast growth (as exhibited by ARBA, CMRC, WEBM) and profitability are nearly impossible at the same time. In fact, a lot of the growth of the current high-flyers has probably been "bought" by heavy marketing which was possible by cheap IPO money. WEBM had S&M of $10.9 million or 70% of revenues (ARBA 81%) vs. EXLN's 53%. If you like fast growth then it wouldn't be fair to blame EXLN for not being more profitable, relatively they are far more profitable than ARBA, CMRC or WEBM. If you prefer a high net EPS you should think about your admiration of WEBM.
<<Just to double-check, you would be looking at EPS of about 50 cents in 2002 if I have done the math correctly. I would be inclined to assign a P/E of 30 in that case, resulting in a fair value of $15 in 2002 if you are correct.>>
Yes, that's about my thinking. Actually I have tweaked my numbers a bit last night, now I have revs of $124M and net EPS $0.46 on 33M shares in 2002. I assume a top line growth of 26%, 27% and 28% from 2000-2002 (and I hope that in reality it will be better). My fair value target is 30 x $0.46 or $14 by spring 2001 and about $50 by 2005. |
