REH and thread,
When I run the #'s on RMBS, I notice something interesting.
(These are all assumptions)
If we capture 50% of the market in '02 the stock price could be less than in '99 or '00 due to the PE ratio coming down- IMO, we can not run at a 150PE into '01, this would come down to 50 or so, thus bring the stock price down if EPS do not grow respectively.
Just an observation for all the quant's out there. Have at it!
EPS Calculations '99 '00 '01 '02
Estimated Market Size $2,600,000,000 $13,500,000,000 $16,000,000,000 $20,225,000,000
Royalty @ X% $39,000,000 $202,500,000 $240,000,000 $303,375,000
Net =X% of royalty $8,970,000 $56,700,000 $76,800,000 $106,181,250
EPS (23M shares) $0.3917 $2.4760 $3.3537 $4.6367
Possible Stock Price $88.1332 $371.3974 $251.5284 $231.8368
Royalty Rate = 0.015 0.015 0.015 0.015
Shares Out= 22,900,000 22,900,000 22,900,000 22,900,000
Net Margin = 23.00% 28.00% 32.00% 35.00%
PE ratio= 225 150 75 50
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