Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Biotech / Medical : GUMM - Eliminate the Common Cold -- Ignore unavailable to you. Want to Upgrade?

To: Mad2 who wrote (3456)	12/13/2000 7:09:40 AM
From: DanZ	Read Replies (1) \| Respond to of 5582

Everyone doesn't agree on the fair value of a company. I have offered reasons why I think GUMM is grossly undervalued at the current price and have stated what I think the fair value is. You toss out the phrase "grossly overvalued" no matter what the price of the stock is and haven't provided any analysis to go along with it. Your comments lack any balance whatsoever. Even by your favorite ratio, price to sales, GUMM is significantly undervalued. At 7 1/2, GUMM is trading at a price to sales of 3.7. The company grew sales 194% from 1998 to 1999 and sales are up about 110% in the last four quarters over the comparable period (Q3 99 to Q3 00). Compare those facts to any other company or industry group and you will find that GUMM is undervalued. Gum Tech's sales should continue growing in 2001 due to substantially higher sales of gum to the Swedish Match joint venture and Procter & Gamble. I would expect sales of Zicam to continue their steady increase as well. If the stock is already undervalued and sales grow even more next year, what is your rationale for saying the stock is grossly overvalued? If you think that the gum business won't be profitable on sales to Swedish Match and P&G, then you don't understand Gum Tech's cost structure, nor have you made a reasonable attempt to estimate sales. Here is a comparison of various industry groups to Gum Tech. Industry Group Sales Growth (TTM) Sales Growth (5 yr) Price to Sales S (TTM) / (P/S) Healthcare 16.7 19.9 10.7 1.6 Biotech & Drugs 30.2 35.9 24.5 1.2 S&P 500 22.7 20.0 6.2 3.7 Gum Tech 108 51.5 3.7 29.2 By this measure, GUMM is undervalued relative to the Healthcare sector by 29.2/1.6 = 18 times, undervalued relative to the Biotech & Drug industry by 29.2/1.2 = 24 times, and undervalued relative to the S&P 500 by 29.2/3.7 = 8 times. IMO, fair value for this stock based on past sales growth, and more importantly expected sales growth and profitability, is 10 to 15 times sales. That would put the stock in the range of 20 to 30, which is significantly above the current price. Hence, IMO GUMM IS significantly undervalued at the current price, and IMO, the reason is manipulation by short sellers and lousy market conditions. So, mad2, what is your basis for calling GUMM grossly overvalued and what is the fair value of this company IYO?