RE:RE:My 2 cents on the Value - $0.17 Today to $0.70 in the FutureAppreciate the feedback, this was just my quick and dirty way to assign an approximate value to the shares for my own personal justification. If you think $0.26 is the fair value that is great and hope it gets there. The way I value a company is to be extremely conservative, yet still practical, and if there is still a large upside potential it serves a great buying opportunity, such as the case with PYD.
Just a few follow- ups:
1) Obviously the trading multiples can be debated until the cows come home and everyone can have there opinion. It makes it difficult to slap an EV/EBITDA multiple on this with no dirrect comparible companies, especially of this size. My justification of the 4 - 6 times, or 5 midpoint, was the low end of the companies that have been aquiring companies such as PYD in the gaming industry. I trade a lot in the smaller cap space and one thing i've learned is that they usually trade at a significant discount to their equivalent big brothers.
I can't speak to IT as I don't know the company, but I would argue that AMAYA is not a direct comparible. They are a technology company, which happens to be in the gambling business and deserve a much higher EV/EBITDA. In the end PYD is a lending company which happens to be in the gamming industry, and financing companies trade at much lower EV/EBITDA multiples. Maybe an EV/REV multiple is more appropriate? not sure.
Lastly, I I'm not saying that PYD doesn't deserve to trade at a higher multiple in the long term. But I believe in the short term they will trade at a discount and eventually close the multiple gap. We can't value PYD using the same multiples as companies making millions - billions of dollars: PYD is still quite risky at this stage. As PYD grows their revenue and customer base a more appropirate valuation may be in the 5 - 8 times range.
2) Yes you are correct, I assumed that it was all equity issuance at $0.07. Is this not the case? I will have to go back and re-read the press release. Assuming 7M debt and 4.5 PP and my previous assumptions I get an implied value of just over $0.22
3) You will have to clarify what you mean here? I Didn't cut the value of debt in half - in calculating the equity value from the EV you have to subtract the debt and add back the cash value.