What is missing along with a finance clarification:
we all know that DMRk has a fully-functional, asthetically-pleasing web site...BUT, what we have not seen are the results in terms of increased sales, reduced admin and marketing expenses, etc. alliances with YHOO, AOL, etc. would only indicate that those types of releases are imminent. so, I really do think any positive news regarding internet sales or reduced costs will drive the stock up...it may come from the financial statement, a press release regarding company internet sales or a press release regarding internet alliances.
as for book value- as i have seen mention of it several time....it means nothing by itself. it is like knowing revenues and not understanding the cost side and therefore profitability...it is only one-half of the equation. let me give an example.
i start a company today that sells music CDs. first, i raise $100 by issuing 10 shares at $10 each. Then, I buy 10 CDs at a cost of $5 each or $50. Thus, I have $100 in assets (my 10 CDs in invenotry and $50 in cash)...i have no liabilities. Since Assets = Liabilities + Shareholder's Equity....in this case, I have $100 in assets and $100 in shareholder's equity or $100. m book value is my shareholder's equity divided by my shares outstanding...or $100 / 10 or $10.....nothing new.
NOW, because of my poor management skills, my admin costs go through the roof and i start losing money badly.....in fact, i sell my 10 CDs and lose quit a bit of money, which i take out from my cash account...in fact, things are so bad that i end up next year with no inventory and no cash...shareholder equity goes to 0 making my shares worthless...but, wait, i'll raise some more money from the public!
so, in simple terms, companies that cannot generate adequate cash flows should liquidate rather continue to erode value and lose the shareholder equity that remains....causing book value to steadily decline. so, if we know that the company is able to invest well its money- a low book value is good....but for one that earns a crappy return- a high book value is only nice if the compnay states they are liquidating or another company looks to purchase them- one that can improve the cash flows of the company and offers a good price for that reason.
SPGLA is a good example of a company that has a low book value and a low market cap relative to sales. future prospects are quit grim for this large company and financial distress is considered by these facts..will internet sales be enough to turn things around....that is the million dollar question.
SKYM was perfect, because it already as profitable with a decent return on equity- making it a no-brainer.
Has DMRK turned things around....i think there is a high probability that it is doing so and we will see the fruits of that in the stock price soon...in addition to the internet sales. |
