What if....???
What if IAIC really started to pan out? Let's suppose it started to grow at a 500% annual clip...with 20% profit margin before taxes...and a 40% effective tax rate. Here's what it would look like...
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................Gross Sales..Profit-before tax...After tax
Q2 1998........ 6,000,000....1,200,000............720,000
Q3 1998.........9,000,000....1,800,000..........1,080,000
Q4 1998........13,500,000....2,700,000..........1,620,000
Q1 1999........20,250,000....4,050,000..........2,430,000
Q2 1999........30,375,000....6,075,000..........3,645,000
Q3 1999........45,562,500....9,112,500..........5,467,500
Q4 1999........68,343,750...13,668,750..........8,201.250
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Total.........193,031,250...38,606,250.........23,163,750
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Now...to me at least....this is a fairly rosey scenario. So we would have a company with a current market cap of 85MM throwing off 23MM in profits. So what? It's kind of like the old adage about the dog chasing the car...what's he do with it once he catches it? In effect,on Jan 1, 2000...IAIC is "out of business". Their core business will be gone. Oh sure, there will be some kind of company left, but what their market and future will look like is a total uncertainty -- and I don't think anyone out there can argue that...not even IAIC.
So what's there current book value?...something like 4MM ? (...I'm not gonna bother to look it up ) So let's add the fictitious 23MM of retained earnings to it...and we now have a company heading into the new century with a BV of 27MM. If we put a market value on it of 3X Book Value...which is higher then the norm...we would have a company with a market cap of 81MM...which is slightly less than it's at right now...and that's after some very generous ( and perhaps ridiculous) projections.
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I think that's why the institutions are staying away in droves....
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later........the dodger
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:PS -- I'm reminded of a news article where the police were called to break up a "domestic disturbance" involving a stabbing, a shooting, and an assortment of broken bones. What was the argument about?...."Who was going to get to drive the new car IF they
won the lottery." Please don't tell me what a great company this is going to be after the Y2K problem has has passed., because you don't have the teeniest shred of evidence to support it...win the lottery first. |
