I've been pondering the valuation question, in light of Kerry's revelation that this deal is basically at 100% margin. (I had not considered that until he posted it.) If that is true, it may be possible to arrive at a stock valuation based on earnings. Here are my assumptions:
Ancor has $3.5 million per quarter in overhead. (I have raised this from $3 million, due to the extra employees required to complete the engineering tasks for the INRANGE deal.)
The normal revenue for a quarter has been in the $1 Million range. (Excluding last quarter's disaster.)
The INRANGE revenue gets spread out over 3 quarters. ($3 Million per quarter.)
Given that, at 50% margins on $1 Million in normal revenue and 100% margins on the INRANGE revenue yields $3.5 Million in gross profit. That means we should be looking at a MINIMUM of a break-even quarter (Q3).
Now, if we carry this forward to Q4, if Kerry is right and the Boeing equipment was written off last quarter, that revenue would go directly to the bottom line. Using those assumptions, along with generating another $1 Million in standard revenue, I arrive at ($1 Million @50% = $500,000 + $1.9 Million + $3 Million = $5.4 Million) revenue for the quarter. Once again, using $3.5 Million for operational costs, I get $1.9 Million in profit.
Here is where my assumptions may break down. I am calculating about 25 Million shares outstanding. $1.9 Million divided by 25 Million is 7.6 cents per share. Multiplying that by 4 (assuming that this can be maintained) yields 30.4 cents per share on an annualized basis. 20 times that is $6.08.
Once again, there are a lot of assumptions here. Ancor must find a way to generate AT LEAST $1 Million in normal revenue in Q4, All $1.9 Million of Boeing revenues must be at 100% margins, and in future quarters, Ancor will have to deliver $3.8 million (at 50% margins) just to replace the Boeing revenue. Even with these assumptions, it does provide some sort of valuation guideline.
Anybody who can find any errors in my logic or calculations, please post.
Craig |
