RE:RE:RE:RE:RE:UI's share price
kaykay22222 wrote: I completely agree with focusing on fundamentals @torontojay, but P/E is out-of-favor for growth stocks (it fits a Coca-Cola with maybe 3-6% growth)
I would rather go here for forward P/S, maybe PEG ratio and Rule-of-40 (Revenue growth + FCF Margin = 40%)
What growth? The company didn't grow in the past year or the year before. It has a lot to prove. The PEG ratio would be ideal if the company showed growth but unfortunately they have not. I wouldn't use the PEG ratio for urbanimmersive.
So we are left with a cash flow analysis. The theoretical value of a company has always been the summation of its discounted free cash flows. If the company has failed to show growth in earnings then a lower free cash flow multiple should be assigned. I believe the software component deserves a higher multiple of sales and earnings.
If I recall from memory, the average saas based company is being acquired at a price to recurring revenue of 6.3 times. If these companies have a 20% margin on these sales, then they are being acquired at a PE multiple of
6.3/0.20 ~ 31.5 times. With a 25% margin, the PE multiple drops to 25.2. So we can use a PE multiple. We just need to know how to apply it. Likewise, Urbanimmersive is acquiring companies at a 13-15 times multiple which tells us what an acquirer may be willing to pay for these photo agencies.