Little Engine, here's the result for one of the companies you cited.
TO ALL: This post is long winded, but points out some very
important valuations, given by LE himself.
First you cite NCES.
It was formed in 1996 and gets over 70 percent of it's
revenue servicing it's parent company!
3 percent gross!
692K net from 10/96 - 5/97
Selling and administrative costs took up 67 percent of gross
Net margin was only 0.1 percent with a NET LOSS IN FISCAL '97
If you go to an off the rack quote server you can't even
find a PE listing. You have to read their latest SEC filings
instead. NET LOSS OF .02/SHARE
and it is trading over $6, with a 52 week high of $10,
and a 52 week low of $5 1/8.
How is that for a comparison? With the stock buy back,
and assuming no growth, 1.8MM is divided nicely by 36MM shares.
That's .05 eps from the '97 figures for MYRIAD ALONE,
without the rest of FAMH's business, and NCES with a loss of
.02 eps is trading at $6?
How about STFF?
They had a 0.3 Percent loss in '96. With a market capitalization
of 658MM, yes that's over 1/2 Billion dollars and 23.5MM shares out,
and with their latest 10Q, as you state, they had net revenues
of 13.9MM. Averaged out, that gives them a one year net of around
18.53MM. So, are you telling us that the market seems to see fit
that this company should have a market capitalization of
35.5 TIMES ONE YEAR NET EARNINGS?
Aside from the fact that Myriad had a higher profit margin, and that
they did indeed have a net margin equal to or near the
INDUSTRY AVERAGE(SOURCE: MEDIA GENERAL FINANCIAL SERVICES),
and that the net revenue from Myriad will
not be the complete revenue for FAMH, and that STFF is coming
from a loss in '96, if you apply the same multiple to
ONLY THE MYRIAD NET IN '97 you get a market capitalization
of $63.9MM.
It is very important to note that total market capitalization takes
into account the total outstanding shares. Even factoring out the
buy back of shares, more revenue from FAMH's existing and new
operations, then the valuation applied above gives a price per
share of $1.59! If you apply the lower net margin for Myriad sales
in '97 of around 4 percent and add in the strong contracts for
FAMH with 12MM in sales for '98, and no growth, you get:
MYRIAD: 1.8MM NET
FAMH: .48MM NET
TOTAL: 2.28MM NET
USING THE ABOVE VALUATION OF 35.5XNET
MARKET CAP: 80.94MM
W/40MM SHARES: $2.02/SHARE
And that is without any of the factors mentioned above!
Jin. Backing it up with real world numbers. |
