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.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Elroy who wrote (66603)	2/21/2021 2:52:52 PM
From: bruwin	Read Replies (1) \| Respond to of 78817

"UAN's direct costs should NOT (I think) fluctuate with revenue. So it's not right to use a percentage of revenue for direct costs." I'm not sure I altogether agree with that contention. What I used in my calculation was the ratio of Gross Profit to Total Revenue. But the Gross Profit is the leftover amount after deducting "Cost of Revenue". The thing is, by working backwards from an EBITDA value one first gets "Gross Profit (GP)" by adding SG&A and R&D to EBITDA. So by putting a percentage value to "GP" one can calculate Total Revenue. And "Cost of Revenue" is generally related to the nature of the business in terms of what its Costs are in the initial "processing/handling/distributing", etc, etc, of whatever it is that provided that Revenue in the first place. Here are the last 10 year's worth of numbers for UAN in terms of its Total Revenue, CoR and Gross Profit .... As one can see the Average CoR was 70.5% and the Average Gross Profit would obviously be 100 - 70.5 = 29.5%. Not that far off from the number I previously used. One is unlikely to get very large swings in the CoR/TR percentage ratio unless the nature of the company's business changes quite dramatically. Putting these percentages into the table I previously presented we get :- 12 Month Total Revenue 152,837 x 4 = ~$611,400. Previous 12 Month Total Revenue = $346,000. Needless to say, this is not "an exact science". There will be variables. But, IMO, we are looking for "Orders of Magnitude" here ...... I appreciate the fact that you are looking at your expected dramatic increase in Revenue due to your expected rise in relevant material prices. So it could be that the next Quarterly Total Revenue number could be a lot higher than the number I've put forward. But what I've put forward is merely the sort of Revenue amount that UAN would have to come up with in order to provide an EBITDA value to ensure that a $7 distribution could be met without bringing in "Reserves".