RE:.20 cents ??? That's not even taking advantage of the "move"BullTrap wrote:
That approximate point arrives only flush with the C&H neckline . You would be missing the pattern's move right at the most vital point where the typical breakout point is located ! TA is forward looking , fundamentals follow , IMHO (wink)
I follow you. What you are missing is that management is weighing the stock down with their massive convertible, warrants, and options grants. Last year when we saw 21 cents, they redeemed enough stock and sold it to move us all the way back to 9 cents. The number of shares management purchased by warrants, options, and convertibles was equal to about 4.4M shares, more than enough to keep the stock down for months. There isn't enough liquidity in this stock to take so many insider sales.
By my calculation, if the fully diluted sharecount is 318.9M (see the 2014 annual report), and the long term return on equity is 25% (I doubt it is with a 20% gross margin), the book value adjusted return on the stock trading at 20 cents is about 7.5%. At 30 cents, the market is letting you make about 5% against the return on equity.
So given:
1) The huge overhang of a very greedy management handing itself things like a convertible preferred that pays 15% interest while allowing conversion to stock at 10 cents,
2) The fact that the accounts receivable is falling apart, opposing the huge rampup in sales.
3) The simple calculation of expected return using ROE
20 to 30 cents is fair value, depending on what you want to compound at long term.
If management wasn't in the way with their overhang of dilution and constant selling, I would hold the stock long term, even if it went above 30 cents.
I think this is a very interesting company with a very unique and good product. I certainly like the market for roller coasters in Asia. I want to own it from time to time.