Ken, I have been told that the margins for:
BrainForest 10% juice will be 17%
BrainForest Springwater will be 22% - 23%
Private label 10% juice will be 15%
These margins will be fantastic if correct. They should produce a lot of earnings and cash flows which will make TCBG a very solid company and will no doubt command a high valuation. High cash flows would help to fund the company's growth by allowing them to purchase more machines with cash.
I think I just found the answer I have been looking for. If TCBG makes the 15% margin on the private label for instance that would be $0.24 net profit and $1.36 to cover costs which would include the ingredients, pouches, packaging and hopefully my missing link, Cliffstar or Sweet Ripe's cut. That would leave the $0.39 to cover the distributor and the retailer. Now that would seem plausible to me.
In the above example TCBG would earn $0.024 per pouch in net profit. With each machine producing 30 million a year, each machine would bring in $720,000 in earnings to the company. There will be 10 machines running by next April which would generate an earnings run rate of $7.2 million per year. Divided by the 24 million shares equals $0.30eps.
Now for the speculation part. Next year will see revenues increase by what, +900% and earnings somewhere in the quadruple digits? If we use a conservative P/E of 50 we would have a stock price of $15.00 around March 2000 which would be exactly a 9 bagger from $1.50 in 20 months.
Further speculation, ( why not its fun ), I was told that TCBG is buying these machines as fast as they are produced so we have to figure they will have closer to 20 machines by the end of 1999. So add those earnings into the above estimates. Then if you really want to dream, tweek that P/E up to whatever you think a +900% revenue, +XXXX% earnings company is worth and you just may like it.
As I mentioned in an earlier post, a child should be able to predict the earnings and revenue growth of this company once the true revenue and margins are known per pouch, the actual amount of pouches each machine can produce and how many machines they will have and when.
One last thing, we were all awaiting a press release today. I have a feeling that the IR guys made the right choice by holding off on it during that huge down market yesterday.
Anyone who disagrees with my estimates above, please don't hesitate to jump on it. But let's discuss it, not argue about it. I think this kind of analysis is much more productive than simply talking about what the stock is going to do tomorrow or next week.
Mark |
