TO ALL - WARNING - Post with many numbers (YUCK):
Having had the opportunity to ask Mr. Cadigan a number of questions on Friday, I wanted to share my attempt to value the merged companies (assuming a completed merger, revenues of 40 million, and a 5% net profit margin). It was put forth that the market cap of the merged entities would be TWO TIMES REVENUES. I wanted to verify that formula and the results follow (PROCEED ONLY IF NUMBERS DO NOT MAKE YOU SICK).
First, I did a stock screening search with the following assumptions:
1) Exchange Nasdaq
2) Industry Computer & Business Tech
3) Market Cap 50 to 100 Million
4) Revenues 2 to 100 Million
5) P/E 1 or greater (company is profitable)
Twelve companies were matched.
Ticker - if you don't know what ticker is, stop trading!
Price - as of closing 8/28
P/E - price earnings ratio or Price divided by earnings per share
Cap - Market Cap. Stock price times shares outstanding (MILLIONS)
Rev - Revenues or Sales (MILLIONS)
Out - Shares Outstanding (MILLIONS)
Net - Net Income
EPS - Earnings per share (Approx. Net Income divided by Shares outstanding)
Ticker,,,,,Price,,,,,,,,P/E,,,,,,Cap,,,,,,Rev,,,,,Out,,,,,Net,,,,,EPS
ADIC,,,,,,8 3/8,,,,,,,,10.6,,,,,, 81,,,,,,,100,,,,,9.7,,,,,,,8,,,,,,,,,.75
ADTK,,,,,7,,,,,,,,,,,,,, 22.6,,,,, 60,,,,,,, 98,,,,,,,8.6,,,,,,2.6,,,,,,,.29
BNYN,,,,,3,,,,,,,,,,,,,,25.7,,,,,, 60,,,,,,, 73,,,,,,20,,,,,,,2.8,,,,,,,,.17
CCUR,,,,,2,,,,,,,,,,,,,,28.6 ,,,,,,95,,,,,,, 82,,,,,,47,,,,,,,7.8,,,,,,,,.11
DGTC,,,,,8 ¬,,,,,,,,,,12.7,,,,,,, 62,,,,,,, 60,,,,,7.8,,,,,,5.6,,,,,,,,,.68
FDPC,,,,,,10,,,,,,,,,,,,17,,,,,,,,, 59 ,,,,,, 37,,,,,,5.9,,,,,,3.4,,,,,,,,,.56
PRLS,,,,,,5 ¬,,,,,,,,,,10,,,,,,,,, 57 ,,,,,,,31,,,,,,10.8,,,,,5.9,,,,,,,,.50
PTIX,,,,,,,9 1/2,,,,,,,13.8,,,,,,,71,,,,,,,,29,,,,,,7.3,,,,,,,,5.1,,,,,,,,.66
PURW,,,,8,,,,,,,,,,,,,15.5,,,,,,,60,,,,,,,,18,,,,,,,7.5,,,,,,,4.5,,,,,,,,.58
ROSS,,,,,3,,,,,,,,,,,,,23.3 ,,,,,,,61,,,,,,,,92,,,,,,20.6,,,,,,2.6,,,,,,,,.13
XTND,,,,,6 « ,,,,,,,,14.8,,,,,,,,53,,,,,,,,50,,,,,,8.1,,,,,,,,3.3,,,,,,,,.44
ZRAN,,,,,6 3/4,,,,,,36.2,,,,,,,,67,,,,,,,,44,,,,,,9.9,,,,,,,,2.1,,,,,,,,.19
What conclusions did I draw from these 12 companies:
ONE:
4 out of 12 traded at market caps less than revenues
2 out of 12 traded at market caps equal to revenues (approx.)
4 out of 12 traded at market caps greater than revenues but not 2x
2 out of 12 traded at market cap 2x greater than revenues
Being conservative I drop the 2 out of twelve 2x greater than revenues.
On AVERAGE the companies traded at a market cap equal to revenues.
For SSGI this would be 40 million in revenues equals 40 million in market cap divided by 20 million shares OR .. $ 2.00 / share.
TWO:
The average P/E of the twelve companies was 19.25. Assuming the 5% net profit on 40 million equals 2million. Divide 2 million by 20 million shares and the EPS equals
.10. Multiply P/E time .10 to YIELD $ 1.925.
I tried not to bias my criteria as I am truly trying to determine the potential value of my investment. Assumptions were kept to a minimum (I.E. I ignored growth, balance sheet concerns such as debt, etc).
I just wanted to share the fruits of my labor. As always, comments welcome.
ComSolut
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