Post by
ridethewinners on Sep 27, 2023 12:05pm
an amateur attempt at valuation
With soft markets and uncertainty in the auto sector it is no wonder GRA is not gaining traction, but the recent announcement should mean a higher valuation.
Here is an amateur attempt.
Considering that the $10 mill is to cover tool costs, I am not putting any profit margin to that part of the package, but it does increase the likelihood that the deal is real , so I am using a lower discount rate on future revenues than I otherwise would.So:
Revenues of $24 million per year, ramping up to full speed in 3 years. I put a 7% annual discount on that.
Assuming a 25% profit margin on those revenues, I get $6million per year profit, discounted by 7% per year leaves roughly $5 million per year, at a 15x multiple gives a current market cap on this agreement alone of $75 million. Given 170 million shares o/s, the recent deal should have increased the market price by about 45 cents per share.
In a more aggressive capital market the multiple could easily go to 20x, as this company is just beginning to ramp up revenues, as opposed to a more stable older company that has reached a revenue plateau.
I am expecteing revenue guidance in November, and I think the current fiscal year will be the last incremental rise in revenues. In fiscal 2025 I am expecting a contribution from the expanded SMC line, some revenues from this agreement, and some revenues from drilling fluids.
I would like to see a 3 year forecast of revenues from GRA, but I am not sure management is allowed to do that, they may be restricted to one year only.
Best of luck