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Microcap & Penny Stocks : TSIS: WHAT IS GOING ON?
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To: John S. Baker who wrote (2020)5/12/1998 12:38:00 PM
From: Crossy  Read Replies (2) of 6931
 
John,
no problem. First why Price Sales instead of Price earnings ? Answer: if You are factoring net or gross margin in a given industry in it has more value as a prognostic indicator. Only revenues need to be estimated, not cost. This uses a "standardization" approach.

OK, for instance in retailing (apparel), net margin (can be even BEFORE INTEREST ! then it's EBTI margin) of 5% warrants a Price to Sales between 1 and 2. Everything below 1 is VERY CHEAP.

Net margin of 10% warrants Price to sales between 2 and 4. Net margin of 15% warrants P to S between 3 and 5. Generally the more proftibale the business the higher Price to Sales will be..

For TSIS, I would say Price to Sales should be 3 to 5 at least. The penny status warrants a discount, so does the non-reporting status. OTOH, good net profit margin, or even a future expected net profit margin of a huge current gross margin warrants an increase in the Price to Sales ratio.

You can dynamize this calculation further if You factor revenue growth in. Provided You can use EXISTING infrastructure (as in TSIS case seems to be so) to leverage and support additional sales, the margin should AT LEAST hold the current status quo. Then top line growth will immediately result in bottom line growth..If You think TSIS will double revenues this year and NOT issue additional shares then this should mean: the stock price should also double...

best wishes
CROSSY
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