Microcap Potential Homeruns--Credible, and Reporting Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Microcap & Penny Stocks : Microcap Potential Homeruns--Credible, and Reporting

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: ihubdetectivey who wrote (1009)	1/4/2014 12:14:55 PM
From: diddlysquatz	of 1056

My year end 2014 price target is $1.00+ Industry average PE ratio for the security industry is about 29. Here is a presentation with some of the better known industry comps. Companies with a stronger technology focus trade significantly higher, on average 55 times earnings based on the comps in this presentation. avantelogixx.com To get to $1.10 I feel they have to have at least one successful acquisition. From my analysis of available private companies for sale in this industry there are many available to buy for 3.5 times ebitda or less. So, I'm factoring in a $2 million acquisition (roughly my estimate of their current cash position). A bigger acquisition, while requiring some form of financing, would likely add even more to the bottom line. An acquisition of this size would add about $0.01 in eps. Throw in some synergies and some up-selling and you likely get about $0.015 in eps from this acquisition. Assuming 25% (down from the current 42%) top line growth rate which should easily produce a 50% bottom line growth rate you get an end of 2014 run rate of about $0.035 eps (this may turn out to be a quite conservative). Add that to the $0.015 from the acquisition and we have $0.05 eps run rate. Discounting the security industry average PE down from 29 to about 20 and you get a $1.00 share price. If they get the industry average PE of 29 you get $1.45 The biggest variables here is the organic growth rate. I think it will be in the 30% - 50% range which likely means a 50% - 100% eps growth rate. I also think that they could pull off a larger acquisition which could add more shares and leverage the balance sheet a bit but it would likely increase the eps. In my opinion this company deserves higher than industry average multiples. Their very high use of technology gives them incredible leverage. Their overall expenses will barely budge with any kind of increase in revenue. And this is now a cash machine. Almost every bit of revenue now goes straight into the bank account. There are many additional reasons as to why I like the company so much such as high insider ownership (top two individuals own 40%). CEO has a solid M&A background. It is a negative working capital business, they get paid upfront before having to deliver their service! Over 90% of EBITDA converts to free cash flow! And the bulk of their revenues are truly recurring. They have business leverage where they can incrementally add new services to existing clients with minimal cost. Many of their monitoring clients run very large companies which helps them to gain a foothold in their corporate security business including their secure travel services. The synergies are quite impressive. I absolutely love this business!

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next