DD's Valuation Intriguing small cap producer, for sure. I do however feel that Danny Deadlock is being quite conservative with his valuation of Invicta.
"You will note that its annualized Q4 funds flow forecast is $10 million, or 13 cents per share. This is important because fair value on these small oil producers is typically two times that annual cash flow per share. In this case that would be approx. 26 cents per share."
Personally, I'm not aware of too many oil producers being valued at only 2 X annual cash flow, and would argue that 3 - 4 would be a more realistic valuation. Even using a very modest multiple of 3 times cash flow assigns a valuation of 0.39 / share. Given this valuation as well as other factors mentioned in DD's article such as management's experience, low risk property plays, drill success rate, potential for production and reserve growth, etc., I feel that VCA is undervalued at its current price (0.19) and took a stake as well today.
Have a good afternoon.