VFX valuationSay VFX hits $200 mm in revenue (a little above $15 mm / month). At 3% margins (until we see margin expansion I am against building it into a model) that translates into $6 mm before operating and administrative costs. In the last quarter the company incurred opex of ~$850,000, or about $3.4 mm annually. That leaves profit before tax of ~$2.6 mm, and profit after tax of ~$2 mm.
At a $14 mm market capitalization, with net cash on the balance sheet of $4 mm, it places us at an enterprise value (ie what the company is "worth") of $10 mm, or about 5x cash flows.
That is a cheap valuation and that is where company's that have limited growth opportunities typically trade. I am not saying VFX falls into that category. But to the move needle I think VFX needs a clear growth path to $400 mm, and it has to have leverage to its current operating structure .. investors don't want to see opex (ie salaries, rent, etc.) double along with revenues.
So where is the growth coming from. Remember, at $0.30 1 year ago this company was valued at $4 million .. today it is more than triple that .. so if we had grown to this amount of revenue without raising any money, yes we would be at $1.00 / share. But we raised a lot of money (most of which is still sitting in the bank), so to get to $1.00 / share now, we need to continue growing.
I want to believe VFX is going to be able to do it, but I want to see them successfully acquiring higher margin contracts for text messages, or continued revenue growth to $20 mm+ per month.
Just my $0.02.