Post by
Captain71 on Jun 08, 2022 2:35pm
SP targets - Different modeling
Ok. If we remember a while back, I would usually post SP targets after quarterly results. Typically my targets were a little less than the pros, as this company was always a little light on EPS relative to revenue, but still very reasonable.
That was back when the company was turning a profit. Since the change in business model, that isn’t working. So I had a look using “cash flow” instead of earnings as some here have suggested.
My fiscal 2022 fair value price comes in at $24.75. That is not too far below the pros. That is allowing for the multiple contraction in tech stocks as well.
With that being said my fair value price with the usual EPS included in the model is $10.60.
Given the current market conditions it would be reasonable to expect the SP to be trading about 25% below these levels. So if investors were using the cash flow model, shouldn’t the SP be quite a bit higher right now? Or are market conditions dictating more like a 50% discount to fair value price?
On the flip side, if all investors were looking at things like I do, we would be sitting at 8 bucks, or even less, so that’s not accurate either.
Guess we are somewhere in between. Interesting to see how nice we recover once we get this inflation and energy crisis behind us.
GLTA
Comment by
Captain71 on Jun 08, 2022 8:30pm
Change of business model is the wrong wording for sure, sorry about the confusion. I was simply referring to the point where the financials changed and they went from being a profitable company to showing negative net income on the quarterly reports. GLTA
Comment by
profitprophet1 on Jun 08, 2022 9:37pm
So after the transformative acquisition which essentially doubled their size and which has the non-cash write offs and cash purchasing costs. Got you. The company is producing more free cash flow than before as you know, I'm sure. I won't go into the reason to focus on cash flow as a number of others have already done so very clearly.
Comment by
masfortuna on Jun 09, 2022 8:49am
And that's why no matter how fustrating this stock is, it still deserves tobe treated with patience
Comment by
Captain71 on Jun 09, 2022 6:24pm
I agree, this stock is certainly frustrating. As for the patience, got a feeling most investors got to the end of their rope when we broke the long term uptrend support and fell off the cliff around the 14.50 level. All joking aside, I honestly hope that tech investors do look at the free cash flow instead of earnings, but it certainly doesn’t feel that way at the moment. GLTA
Comment by
Torontojay on Jun 10, 2022 9:16am
When the stock market was trading at frothy valuations last year the fundamentals appeared not to be relevant. Its fair to say that the opposite is true when people are panic selling over an uncertain economy. Nothing is making much sense these days but I believe the growth in free cash flow will dictate the future price for Sangoma in the long run.