More on Competition. I almost jumped in but did some figuring, wonder what you think.
This is from a post intended to reply to youcantsaythat on Yahoo! LZRC who had said:" You can argue until you are blue in he face" but there is a foulup. SI has no LZRC thread ! So, I try it herE :
>>I am not Blue in the Face, I am trying to find out whether I want to buy the stock. So, reduce the heat.
1 - I agree, LZRC appears better managed than the other two.
2 - I got a reply from my daughter in Toronto. Her clinic (not part of the three ) >>the price is still $2000 per eye including all post-op care. The Lasik surgery is $2400 per eye including all post-op care<< Mind you, Canadian Dollars i.e. US $ 1350 and 1600.(+ 15 % Tax ?)
3 - Made a little calculation from most recent available data on procedures performed per Mo or Q , multiplied by 12 or 4.
In stock, what cost for one procedure per year done ? Just to compare, I know they are going up, but so are the Lasers.
-----------Price per annual----------Procedures per----------Number of
-----------procedure output----------Month and Center--------Lasers ?
LCAV--------$ 6 200----------------------90------------------21
LVCI--------$ 7 000---------------------125------------------36
LZRC--------$ 9 000---------------------175------------------49
(The numbers are reasonably close, I hope.Sorry, don't know how to make tables here) The prices are surprisingly close. # shares divided by Procedures per year, multiply by share price. Its what you pay for 1 procedure/laser and year. Not capacity, but ‘performed'.
One guy who works there posted a while ago, some East Coast LZRC centers do 300/mo. So none are loaded, on average. Also, one every half hour could be improved on, more Drs. It only takes seconds plus getting set.
(So, LCAV needs better salesmen. Or do they do the less popular LASIK ? )
So, I was ready to jump on the Momentum bandwagon, but this made me think.
I ask you: If you were to buy it as a business, would you pay such price? Lets do some wild figuring: Let's say they make
$ 500 per procedure (after taxes which they won't pay for awhile until the NOL is used up)
This goes on for 5 years, then $ 400, $ 300 $ 200.
That totals $ 3 400 , forgetting the discounted cashflow one usually does - this being just back-of-the-envelope.
Why spend $ 6 000 or $ 9 000 for this prospect ?
You can refine it if you know more details of the business. The lasers are written off in five years and if they can be just software-upgraded that would help, no depreciation. But I bet in 5 years there definitely will be improved models. By that time the “customers” will know enough and ask: which machine do you use. Eyes are precious.
So, what is the basis of your enthusiasm ? Pure bet on Momentum, in this case irrationality ? Of course, the market can be irrational. But I don't need the money, do it for fun and the intellectual exercise. I'll gamble my money on more rational stuff (and still be wrong some of the time!). Show me where it is.
I am not arguing, just looking at facts as best as I can make them out. Probably very incomplete. But facts are what I am looking for.<< |
