Sun Tzu,
First, thanks for the great post. I'm not a TA person, but your FA insights are very enlightening too.
Applying the current PSR (1.54) and PER (11.2) to the revenue=232mil and income=128 numbers yields a market cap of between $357 mil and $1,433 mil, respectively. Current market cap is $252 mil so the potential market price rise is between 41% and 468%.
Of course, a company that was able to maintain 55% margins as these numbers suggest would be just about the most desirable company on the NASDAQ -- SG&A expenses almost always scale at some ratio as sales rise, so it's maybe useful to pull back the expectations a bit. Also, as many of the posts point out, it's still unclear whether the TDFX brand and reputation give it the pricing power that result in these kinds of margins. The good news is they seem to be as aware of that as anyone, and also seem to be delivering on a brand-building plan.
Having sold software to the OEM market before, I can vouch for (1) the desire of OEM's to reduce risk by not necessarily bundling the state of the art product (2) the value of an OEM agreement to the seller -- it becomes a base for sales and also provides clout.
In short, still seems that there's a lot of upside potential for the stock, but not necessarily off-set by the downside risk which other posts have pointed out in detail.
Thanks again,
-OGM |
