Your analysis of free cash flow is correct in methodology but IMO requires some fine tuning.
1. Projected Revenue of $400M is probably on the conservative side. Most analysts are projecting 30-40% growth over '96 revenues of $334M.
2. COGS of 26.4% in Q1-97 is exagerated somewhat by the $13M one-time licencing revenue received from ECG. You may want to annualize on a COGS number like 30%.
3. Tax at 40% may also be a bit high. Management guidance was 35% going forward during the last conference call.
4. If you annualize Q1-97 repayment of LT debt you get 12,216, and not 15,500.
5. Of the $17,845 in purchase of capital assets in Q1-97, $15,743 was for software licences & purchased software. This is a lot higher than Q3-96 and Q4-96 and probably due to licence technology purchases for Office for Java. We will have to wait until Q2 to see if the numbers come down, which I suspect will. Annualizing on the $17,845 figure is probably going to give an overstated number for Purchase of Capital Assets. In Q3-96, this number was $13,927 and in Q4-96 it was $9,879. IMO, annualizing on the average between the Q3-96 and Q4-96 figures may give a more accurate prediction for the remaining quarters of '97.
If you take the above into consideration, you get $0.45/share free cash flow, and a multiple of 15 would give you a price of US$6.75
Strictly on a cash flow basis (profit + Depr&Amor), and pluging the same numbers as above, you get $1.35/share cash flow, and with a multiple of 10 you get a price of US$13.50
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ah |
