Carl: The PSR was up around 70 times the most recent quarter. In the end NETP will probably trade at a PSR of about 3, and it is still at 6 times the most recent quarter.
I just caught this in your post. What is PSR? Price/Sales?Revenues ? You and I may be using different methods. I am using Price to Sales.
By my calculations, when it was $66 the multiple was 31.2 not 77. But $66 was a momentary spike. $50 was a more reasonable level for the better part of 3 months. At $50 the multiple was 23.63. These multiples were less by 50-65% than those achieved by other eCRM companies during the bubble. Furthermore, they are not inflated at all but well within normal non-bubble ranges.
As Robertson Stephens points out, valuation is an art not a science. It is especially difficult in new economic sectors like the internet. NETP is even more difficult to value. It is not an internet company, as such, but a business software company. A large part of its revenues come from clients who are seeking for ways of using the internet, including e-mails but also telephone call-centres, and advertising and knowledge management and merchandiser data analysis. Some brokerage houses classify it as an e-marketing company, others as a CRM company.
Many factors are taken into consideration - even within a clearly defined sector valuation multiples can cover a wide spectrum - look at CPQ and DELL.
Assuming $55 million sales for 2000 NETP it is now selling at a multiple of 5.2 to 2000 revenues.
We are getting to the time of the year when it is normal to use following full year revenues (2001).
Assuming FY2001 of 100M revenues, multiple is 2.86
Assuming FY2001 of 150M revenues, multiple is 1.90
In 2001 it should become profitable, which ought to strengthen its multiples.
I have not seen all the analysts reports, but the lowest multiple I have seen applied to NETP by analysts is 17, and the highest is 27.
Using both of these with the above revenues, the following would be an appropriate price today:
FY 2000 - $55M @ 17x = $35.96
FY 2000 - $55M @ 27x = $57.11
FY 2001 - $100M @ 17x = $65.38
FY 2001 - $150M @ 27x = $156.31
These are not "target" prices but prices justified now on the above assumptions. The target price would change - and presumably increase - as we move forward in time and take into account more of future revenues and earnings.
Nor is this an empty exercise. If NETP was to be acquired the acquirers would be expected to justify the price they bid with some such exercise. An acquirer normally pays a premium for future revenues or earnings.
(I have used 26 million shares and a current price of $11) |
