CEMATRIX Corp T.CEMX

RE:RE:RE:RE:RE:RE:RE:How many warrants were there?

[Joe455]

DougInGreen wrote:

I would say at market close today that the stock is fairly valued.

50 million market cap at 35x PE (what I consider to be an appropriate PE for a high growth company) requires 1.5 million net income profit. Investor materials claim 25-30% gross profit but the last time I looked at their financial statements around 15% gross profit was closer to the historical average. Based on their fixed costs I remember figuring out that they needed to do about 30 million in sales to be break even/profitable based on their fixed costs and something like 15% gross profit.

So if they had 0 cash and 0 debt I would say that 50 million market cap is appropriate for this company. They have 22 million cash and 12 million in debt due this year, so only 10 million in cash to spend. So maybe 3-4 million for another small acquisition and the rest to make sure they have enough cash to stay solvent in bad quarters. At this point it seems like expansion is more important than acquisitions. Management has said they currently have the capacity/equipment to do about 175 million in annual sales.

The .41 cent warrants are less than 1% share dilution so not worried about that. By the time I have to worry about the .81 cent warrants I'll be well into profitable territory. I think the stock is fairly valued at these levels but not cheap enough that I want to buy more. I am thinking it is highly likely they'll be awarded a number of big contracts in the next 12 months which should drive the price up significantly.

Hope that all makes sense!

New management would help things get back on track.