RE:RE:RE:RE:new 52 week highLingo has been a star in 2015. So do you buy a stock at 52 week highs?
Depends on what you think happens in 2016. LM.v is going to earn around C$.10 in 2015 so you paying less than 10X at current price of C$.89. IF they improve to the C$.13 to C$.15 range in 2016, we could see C$1.50-2.00 in 2016. The multiples should expand as the market sees that the big profits from Q2 forward are sustainable.
The magic in the sauce is the gross margin for online software sales. They've already spent the money to develop the courses. If they can sell the courses to more people, there is very little additional cost and the big margins drop to the bottom line. Oversimplification but that's what's attractive about LM.v. IF they can maintain their torrid sales pace and build gross sales, profits are going to expand rapidly. They should expand faster than sales but as organizations get more successful, expenses rise as well. Bonuses, taxes and various other growing pains can erode profits but that's why the generous gross margins are so important. There is room for expense to grow and still leave a nice profit.
Q4 should be extra good because Q2 and Q4 is when they report the royalties from their old printed textbook business. Should add about $900K to top line as a royalty with no expenses included. So Q4 could rival the Q2 number of .04eps. Nice way to end the year.
Then Q1 will get reported in May and will be all online sales. Probably drop down a bit from Q4 but should still compare well with Q1 2015.
It won't be all smooth sailing for LM. They will have lumpy revs depending on when various contracts come online but the profit machine is there if they can feed it with enough sales. The market is large and established so LM doesn't have to create new markets, they just have to win their share of a big pie.