Valuation IndicesGVC is a conglomerate.
That is, it contains several different busineses under one roof/stock listing.
Conglomerates have heavily discounted valuations, because it is difficult to get a clear reading on future performance for different niches, each with different growths, trends and margins.
Try getting a read on GVC and you will understand exactly what I am saying.
Conglomerate value is best maximized by selling or spinning out the different business lines.
This is what I expect that we could see here, but it may take place after privitization..if indeed that is the reason for the massive insider buying here.
But, as conglomerates go, here are their rated valuation multiples for your guidance..
First, let us see the average profitability of conglomerates from this link..
https://csimarket.com/Industry/Industry_Profitability.php Its 28.1 %. GVC was over 32 % in its latest quarter, so we are doing well in that respect.
That same link, you will find the valuation column for conglomerates.
Its 2.03 times for price to sales. Taking Q4 of 2020 as a reference point,
annual sales would be about $170 m. This gives a fair market cap of $345 million or about $2.75 per share
Its 17.1 times for price to cash flow.
Annualizing Q4/20 cash flow of $6.4 m ( $25.6 ) and the fair value market cap is about $435 million which computes to $3.50 per share.
Its 3.28 times for price to book ( $170 m) which is about $550m or about $4.40 per share
In any privatization, fair value would be close to book ( $170 m ) but not lower.
However, that fair value and all of the fair values estimated above would be out the window if Bill 10 is approved which seems almost certain.
Bill-10 will enforce tech giants such as Google and Facebook to pay for the news etc which they now steal for free from local media both print and digital.
Using Australia as a proxy, Bill C10 will add about $0.20 per share or more in free cash flows ( $25 m ) each year to GVC.
This of course makes GVC a veritable cash cow , even more than it is now enroute to, with its lean and mean operating costs and no debt going forward.
This is why there has been massive insider buying lately and why astute investors are now beginning to load up