Second Wave Petroleum Inc SCSZF

RE: A little math for your Tuesday morning

[vandenp]

The company is saying their expenses (not including cost of sales) are ~$140,000/mth. I believe it's much closer to ~$280,000/mth considering the last financials stated they were at $330,000/mth ($2,918,625 / 9mnths). Anyway, let's meet somewhere around $200,000/mth in other expenses. I believe their ratio of revenues to cost of sales is 1.8 ($981,107 / $536,394 = 1.8). Obviously this is just my opinion based on the latest financials. This ratio may be different for “real time bookings”. I believe the cost of sales may include taxes on these sales. Please correct me if I’m wrong. Therefore, assuming these numbers remain roughly the same, for SCS to break even they would require revenues (sales) of about $5,400,000 because their expenses would be roughly ($5,400,000 / 1.8)+($200,000*12mths) which equals $5,400,000. I believe at LEAST a little more than $5 million is what is required for SCS to be able to cover current expenses. Assuming this, 80% x 800,000 * $US7 = $US 4.5m per year = ~$CDN 7.4m per year, I guesstimate their expenses will be ($7.4m / 1.8)+($200,000*12) which equals $6.5million. Their profit would be about $900,000. A company's P/E ratio is computed by dividing the current market price of one share of a company's stock by that company's per-share earnings. A company's per-share earnings are simply the company's after-tax profit divided by number of outstanding shares. For example, a company that earns $900,000, with 50 million shares outstanding, has earnings per share of $.018. If that company's stock currently sells for $.20/share, it has a P/E of 11. Stated differently, at this price, investors are willing to pay $11 for every $1 of earnings. $2.25/share with a P/E of 15 would mean: earnings of ~$7.5million with 50 million shares. $2.25 / ($7.5M / 50Mshares) = 15 To get ~$7.5million in profit I believe we would need about $CDN 22million in revenue. $22m - (($22m / 1.8)+($200,000*12)) = $7.37M We have a ways to go but I believe we’re headed in the right direction.