After lurking for the past two weeks, and watching the ebbs and flows on this NG, and having spent 10 hrs in a business strategy class for the 4th time (what can I say... I'm a slow learner), I felt inspired to post. If nothing else we can get an interesting debate started on the merits of fundamental analysis.
I picked up a couple DVNTF with my proceeds from gains on COGNF... guess it was doing my taxes which compelled me to invest...
Here's my 2 cents worth... flame away...
There are two reasons for a tech company to enter a new market... expectation of future profits, and making yourself attractive for a buyout... since it's a little hard to anticipate future profits this early in the game, we need to find some other parameter to try to fix a valuation.
Times sales is a measure I've used in the past for tech stocks with no near term profits. I haven't run a FSASVM on this sector, so I'm guessing this is a relevant parameter (does anyone know where you can easily download valuation parameters for various stocks (P/E, ROS, ROE, ROA etc)to a spreadsheet?)
Many software companies trade at 5 - 10+ times sales. Since CIT was well connected to the banking community, lets assume DVNTF's first customers will be the big 5 in Canada. Assuming DVNTF uses value based pricing, and want to offer better value then Entrust (ie higher relative quality at a lower relative price), a good starting point would be the cost of an Entrust solution to the banks. Does anyone know the cost of 1mm seats of Entrust??? I've heard pricing of $40 per seat for low quantities... Assuming a 50%+ discount, this might let DVNTF in (better price & quality) at $10/seat x 1mm customers = $10mm per bank.
2 banks x $10mm x 5 times sales = $100mm market cap. (assuming all the assumptions are correct :-)
My 2 cents worth... comments welcome... |
