Interesting point about cash flows.
However, I have one problem with using that method to get a handle on valuation - particularly with these Y2K companies.
In the case of something like a REIT where we can tear apart the company and find some real assets (i.e. some office buildings in Nebraska, some malls in Kentucky, etc.) and we can project income, appreciation/depreciation, pass-through, etc. *reasonably* well in a 5 year time frame, this valuation method is reasonable.
In the case of the Y2K companies all we have is little or no cash, spotty income, and NO ASSETS. With the exception of Zitel, these are consulting firms...much like a Hollywood studio, the assets walk out the door every night. In fact, they are even worse than a Hollywood studio, because a studio may have a very valuable asset in its film library.
Now let's take a look at the company I have the most problems with,
Zitel/MatriDigm.
MatriDigm claims to be sitting on an asset which sounds suspiciously like one of those money-machine scams. Put a blank piece of paper in one end and out pops a hundred dollar bill on the other, or in Zitel's case, shove some code in one end and out pops Y2K compliant code on the other. It's never that easy...and furthermore, the only access the market has to this supposed asset is through the very poor filter of the Zitel corp. If the fabulous code machine does start minting money, exactly where does the cash go? How about if Zitel's core business turns even more sour than it is now?
Quite frankly, I'd rather gamble on oil and gas leases. |
