If ONSL doubles their revenue (not too far fetched, considering the avg. growth rate over the next 5 years is expected to average 50%/year), and holds their other expenses steady, they will break even, even at existing margins. Every single analyst thinks the company will be profitable next year. FWIW - I notice your margin calculation included the inventory write off. Without that, the margins were around 11%. Assuming the amounts are eventually determined to be inventory-related, they probably were caused over several periods, not all at once, so the margins are most likely already higher than 9%.
The prior period's profit occurred (prior to their IPO, not after)with significantly lower revenue levels than are present today. As I pointed out in my earlier posting, ONSL is VERY efficient in producing revenue, so their costs will most likely not increase at anywhere near the same rate as their revenues, so the forecasted profits seem more likely than not. ONSL is only showing a $.40 loss/share, as compared with AMZN's $.70+ loss and similar losses for the non-YHOO search engines (LCOS has a loss/share well over $6).
As to the reserve, a large portion of it was reversed in the prior quarter's amended 10Q, including the effect of any recovery. If more is discovered, they will most likely report it in the MD&A (since it would be to their benefit to put this behind them). Since the reserve was required to be reported as a separate line item on the income statement, any material recovery would also have to be separately reported. |
