By: zaxon
Reply To: None Thursday, 8 Apr 1999 at 11:22 AM EDT
Post # of 2746
For those who haven't read this post yet, here's a repeat of the message I posted last night:
Alright. I've been reading these posts for a while and I think it's time I contributed. I performed a trading revenues multiple market valuation of BII based on 5 comparable companies: EBAY, ONSL, EGGS, UBID, and PCLN. Obviously, there's no “right” method of valuing any internet stock, but here's my humble attempt. It's up to you to interpret the following figures.
To all you guys who don't like to get mired in the details below, I concluded that based on fiscal 1998 and 1999 revenues (U.S.) and taking an average trading revenue multiple, I arrived at a per share valuation for BII between $37U.S. and $92 U.S. Taking an average trading revenue multiple excluding the hi and lo trading revenue multiple among the five comparables, I arrived at a per share valuation for BII between $21.07 U.S. and $51.81 U.S. Taking a weighted average (explained below) trading revenue multiple, I arrived at a per share valuation between $29.75 U.S. and $73.15 U.S. THEREFORE, TAKING THE MEDIAN BETWEEN $21.07 U.S. (THE LOWEST VALUATION) AND $92 U.S. (THE HIGHEST VALUATION), ABOUT $55 U.S. APPEARS A REASONABLE VALUATION BY THE END OF FISCAL 1999. This assumes: 1) that BII meets or exceeds fiscal 1999 revenue estimates and 2) the market continues to perceive the online auction industry as favorable as it does now.
And now for the details. For the 5 comparables above, I calculated the adjusted market cap (price/share times shares outstanding plus debt less cash). I then divided the adjusted market cap by each of the comparables' trailing twelve month revenues (info. per Yahoo finance page). Thus, I derived the following trading revenue multiples: EBAY = 384x, ONSL = 3x, EGGS = 2x, UBID = 12x, and PCLN = 302x. BII's revenue multiple was 66x based on 50 million shares outstanding (I chose fully diluted outstanding shares). I then took the average trading revenue multiple for the 5 comparables and arrived at the following: Mean trading revenue multiple (“plain mean”) = 140.67x, Mean trading revenue multiple excluding the highest and lowest multiples (“adjusted mean”) among the 5 comparables: 79.2x.
Applying these average multiples to BII's fiscal 1998 revenues of $13.3 million U.S. and dividing by 50 million shares outstanding, I arrived at a valuation of $37.42 U.S. per share (based on the plain mean) and $21.07 U.S. per share (based on the adjusted mean).
Applying the same multiples to BII's fiscal 1999 revenues of $32.7 million U.S. and dividing by 50 million shares outstanding, I arrived at a valuation of $92 U.S. per share (based on the plain mean) and $51.81 U.S. per share (based on the adjusted mean).
In addition, I weighted the 5 comparables' trading revenue multiples based on similarity to BII's business model and arrived at the following weights: EBAY = 20%, ONSL = 32%, EGGS = 6%, UBID = 32%, and PCLN = 10%. Again, these weights are subjective and it's up to you to adjust them according to your information about the 5 companies.
Multiplying each trading revenue multiple by the assigned weights above, I derived a total weighted average trading revenue multiple of 111.86x. Applying this weighted average multiple to BII's fiscal 1998 revenues of $13.3 million U.S. and dividing by 50 million shares outstanding, I arrived at a valuation of $29.75 U.S. per share.
Applying the same multiple to BII's fiscal 1999 revenues of $32.7 million U.S. and dividing by 50 million shares outstanding, I arrived at a valuation of $73.15 U.S. per share.
Hope this sheds some light to the valuation issue.
Zaxon
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