RE:RE:Valuation scenario.3,000 units at $7,000 revenue per unit to KNR (in Cdn dollars) gives them $252,000,000 annual revenue. Give it a 30% gross margin (that will cover general and admin that is not huge) and that works out to about $75,000,000. Slice it in half for profits and we are talking $1 per share. For 3,000 units but profit increases as you scale up. For a fast growing company even a 10 P/E is low. So conservative $10 SP for 3,000 units sold, $30 for 9,000 without increasing the profit margin because the general and admin would not increase proportionately. Still a great, great buy.
pointer wrote: canyousayiii wrote: Trying to figure out the risk/reward today. They are gearing up for production capacity of 20k units per month. Let's assume there is a reason for that!!! Let's work backwards. Assume they sell 3,000 units per month. Assume revenues to KNR of $7,000 after a generous distributor cut and let's assume KNR sells nothing directly (very unlikely but conservative). That is $21 million monthly or $252 million annually. Slap on a 4 times sales multiple and that is about a billion market cap divvied by 40 million shares. $25 SP. Using the above assumption of 3,000 unit sales monthly, not including current core business which may benefit from BioCloud visibility, not counting recurring cartridge revenues. What am I missing? Too high of a sales multiple? Half it. $12 SP. So $4 for every 1,000 units sold. At these ratios, sell 4,000 units, and that is $16 SP. 5,000 = $20 SP. 10,000 = $40 SP. Go back to 4 times sales ratio, double these. What am I missing? A buyout offer once they they start delivering sales and one that will not give us the above premiums if the current SP doesn't move? I don't think I can come up with better numbers on any of my other plays, but before I put much more into this basket, what am I missing?
Personally, I never liked the method of using sales multiples to determine the value of a stock. There are too many variables involved, as costs of goods sold can vary a lot from company to company. That is why I tend to use things like PE multiples that even the playing field. Profit is profit, no matter how you get there.
But I don't think it matters what valuation method one uses on KNR, it is extremelydifficult to come up with a scenario that justifies a $5 share price. Everything I have seen results in multiples, often many multiples, of today's share price.
And it looks like our story is only beginning to hit the internet, so we might need a 5-point harness to keep us in our seats in the coming weeks.:o)