Pe's of 15 reflect growth of 15 to 20 percent.
This is a valid observation. Steady, proven, sustainable long term growth.
Look at stocks like Lucent, Dell or Cisco and you will see PE's of 50 to 120.
These companies are quite large, have patented technology, and/or commanding market share. And all are part of an Index, which are benefiting from the flow of institutional money into index and large cap funds, at the expense of small caps, much less micro-penny caps.
What drives PE's is growth, to your point. Investors are willing to sacrifice current yield (earnings) for future earnings. A PE of 50 means investors are willing to wait 50 years to break even on earnings, or an earnings yield of 1/50, or 2% per year. Why, when one can earn 5% on money market funds? Growth.
The first question is proven growth. Has the company demonstrated in the past the ability to produce growth at the rates you suggest. In TSIS case, not yet.
The second question is what business risks the company faces to deter the growth. Most of the historical revenue is all from one customer. If this company walked, the earnings would collapse. The company has managed that well, and is beginning to diversify its revenue. But it is early.
The third question is what technological risks the company faces. Customers seem to be comfortable with the services, but no patents exist. So a competitor can compete on quality and price.
You have stated a $10 to 15M company, but your estimates are all in %. The reason is regardless of the recent CPNI business, we have no clue as to the revenue. I am hoping it is high, but who knows. GTE was to be huge also.
Finnaly, concerning Frontier, all the estimates I heard in the past pointed to a best case $60K to $80K per month when up and running. Don may have been looking at the quarter rather than the month when he spoke. Please confirm with the company before you repeat this again. If Frontier is in fact contributing $120K per month, I will be buying additional shares on Tuesday, as that business alone would be adding 2 to 3 cents in annual earnings and at 10x justify the current price. All other business would be a bonus.
jmt
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