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At the current levels of valuation, it appears that everything and anything that "could" go wrong is factored in the stock price. If one were to have confidence in the 0.08 estimate, it says that KLOC is trading at SEVEN AND A HALF TIMES earnings. With 50 million shares outstanding it has a market cap of $29,000,000. Lets use this number and compare it on a relative basis to a couple of others, one which may be considered "fair value" and one which may be considered "overvalued". EVAC has sales of $26 million and a market cap of $26 million. EVAC also has a Library of $27 million. If KLOC had similar multiples it would sell at $1.60 on sales of $80 million and $1.50 on a library of $75 million. The other comparison is with AFTY. AFTY sells for 60 times sales and 100 times library. A similar valuation would put kloc at $96 on sales and $150 on library. At 8 times earnings, at 46% of sales, and 38% of library value, this stock can only be defined as grossly undervalued. Value players don't ask "what will make KLOC go up?", they simply ask is it cheap? If the answer is yes, then you buy it and put it away. You certainly don't watch every tick in price nor every news release. Is a request to boost authorized shares, which may lead to future financing, a negative? It is a moot question. Raising funds (borrowing, equity, convertible, whatever) and making a qualitative determination on such an action can only be made AFTER the proceeds have been expended and a return quantified. I mean really, if I said a company is going public, is that bad? Of course not, it's "no answer". If they take the money they raised and lose it, yeah then it was bad. If they take the money and greatly expand sales and profitablility it was wonderful, do it every month as long as it can create a real return. In the Journal today, Home Depot ran a tombstone saying raised $1,104,000,000 in a convertible offering. Is this bad? Does this mean they are desperate for money? Doesn't this mean they are flooding the market with future shares. Aren't they diluting current shareholders. Shouldn't they wait until the stock gets even higher...does it mean they don't think the stock is going higher? All moot questions. Only time will tell if they can properly deploy the funds raised. Raising money is never bad. The Hollywood Stock Review is coming out with a new report. Call 310-285-1778 for a copy. It is complimentary if you mention you saw it at techstocks. |
