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Strategies & Market Trends : Steve's Channelling Thread
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To: Zeev Hed who wrote (7696)11/11/2000 9:18:37 PM
From: Zeev Hed  Read Replies (2) of 30051
 
Larry, come to think of it, if indeed these rough calculations are correct and the breakeven does not start until they reach $88 MM per year, then we probably should not expect to see $1 per share earnings (sans royalties earnings) until they reach some $180 MM of annual sales. Even if sales double every quarter from here, that is at least a good five quarter away. The time horizon for that $1/share earnings should probably be delayed further by two to four quarters, since I have an "intrinsic" assumption of 50% gross margins. I think it is unlikely that they will get their overall yield to 80% in that time frame. If we use a more conservative assumption of 30% gross margins, then the quarterly break even point is $37 MM or close to $150 MM per year for break even. And using your number of 46 MM shares, to have $1/share in earnings (assuming sales beyond break even have a higher margin of let say 50%)will require annual sales rate of close to $242 MM (no taxes assumed since for the next few years they must have ample carry forward losses). If you assume 30% gross margin for the total production, $1/share earnings does not come in until above $300 MM in annual sales.

I think these numbers could be used as a framework of potential valuation as they advance toward these sales targets.

By the way, they cite 37.8 MM shares fully diluted to which I have added the new 3 MM, how do you get to yor number?

Zeev
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