Ok, so there was hype in 1994. That explains the huge fall to way-oversold.
Thanks. Wasn't aware.
So, now we've seen the extreme move to blow off all that speculation and turn it into dispair and now to opportunity.
... I like it.
In my experience, it usually takes a few years to get back to fundamentals (and respect) after a hype job. We're in that time-frame now.
PSR is one of my favorite valuation tools.
Price Sales Ratio.
Price per share divided by sales per share.
Think the concept was popularized by book, "Super Stocks" from years ago.
Rought rule of thumb: Stocks with a PSR below 1 are worthy of investigating.
But the best bargains are when the stock is fundamentaly sound and has a PSR below 0.5.
HIPC's is 0.42.
If we throw out the years, 94-95 and use the historical PSR of the remaining non-hype years, we get an average PSR of 1.07.
So a reasonable expectation would be to trade around that figure.
Which would be about a buck higher than now, about 40% higher than current price.
A good site that gives PSR ratios is:
wsrn.com
And then quicksource, fundamentals.
The HIPC link is:
wsrn.com
Scroll down to subtitle, "Ratios" and look at "Price/Sales."
For comparison, check out the PSR on Yahoo.
It is 108.72.
Which means, at the current numbers, Yahoo would need over 108 years just for the revenue to match the current price.
(and we aren't talking earnings here, either)
By contrast, HIPC's price is only 0.42 (42%) of the revenue stream.
If that is hard to visualize, here are the numbers:
Revenue = $94.6 million (trailing 12-mo.)
16 million shares times $2 1/2 current price = $40 million.
So, while Yahoo need 108 years for revenue to match price, HIPC only needs 5 months.
The principle is:
This stock is cheap.
The anticipation is:
Revenue is great, so small improvements will have huge impact on bottom line.
Jerry |
