RE:RE:RE:But what is it worth?They reused that wording from a prior MD&A (See Q3-20, last sentence in the second to last paragraph on page 8). In that case, the fluctuation in costs was more so due to timing because of the number of claims as the average settlement cost per claim ranged from $20k - $30k.
In the most recent quarter, when you resolve 63 claims for a cost of $4.2m ($67k average per claim) and resolved 73 claims in Q1-20 for $2.0m ($28k average per claim), the reason for the increase in cost is not timing. It's because the average cost of the claim has increased.
Will this be a trend? I don't know, but I'm concerned about precedents as the cost per claim on a quarterly basis has increased over the years from lower than $20k.
For me, this risk outweighs any increase in profitabilty over the next twelve months. If I were a major shareholder, I too would claim there's value in the company. I believe there is, but not worth holding onto at this price with the current litigation and over 1,800 claims that need to be resolved.
I think the SP would have left the ballpark in the last few quarters if it weren't for COVID-19 and the claims under control. My concern is the next few quarters' profitability will be muted by the cost of the claims. We shall see.
Do the math yourselves. $360m of backlog for the next 12 months. Sales of $90m per quarter (let's say). Margin of 28% (an increase from 26.8% in Q1-21). Gross profit of $25m. Opex of $16.8m (Q1-21 of $23.8 less $3.0m of depreciation and amortization, less $4m of claims costs). This leaves $8m per quarter in EBITDA from operations (theorhetically). If the claims costs are $4m a quater as they were in Q1-21, that's half the value of the company.
I need more comfort over the cost of the claims and need to see a reduction in the claims growth to be comfortable holding this over the next year.