Think Research Corporation V.THNK

Analyst Estimate Changes vs. Initiation

[dt_core]

I took a look at some of the initiation reports on THNK published by analysts to see what had changed from their 2023 estimates and also how it compares to the companies updated guidance run-rate exiting 2022. I'll spare the details by generally these are my observations:

1. The average out-of-the gate target pric on THNK was $6.00 or thereabouts. which roughly translated into an EV/S multiple of 4.0x 2023 numbers and an EV/EBITDA of 30x. Those are fairly lofty valuation metrics in today's markets so adjusting for something more reasonable in the current environment (e.g. 1.5x trough to 2.0x more normalized EV/S multiple. I also looked at EV/EBITDA multiples) would have produced a target price of $2.50 on the low end to $3.20 based on the original estimates for the company. In other words, the decline from $6.00 to $2.50/$3.20 is all due to valuation contraction in the markets.

2. Next I looked at how estimates changed based on updates from the company and guidance and a few things jump out. First EBITDA estimates for 2023 haven't really changed that much at around $8.1M for 2023. What has changed is the amount of revenue (higher now), number of shares (higher now), Cash on balance sheet (lower by about $10M) and level of indebtedness (higher now). So essentially more dilution for shareholders and lower forecasted margins albeit off of a higher revenu base. Net, net the new estimates at current market multiples suggest a $1.50 to $2.25 target price.

So based on the reasoning above the decline in THNK's target price from what investors thought at the time of the IPO can be roughly explained as 75% due to market forces and 25% due to declining expectations of corporate fundamentals. That tells me that when markets recover (eventually) we could see a lot of positive movement on the shareprice providing that management delivers on current expected fundamentals.

[horseshoefalls]

These guys basically downgrade or revise their targets so it's still something realistic to get back to and so they don't look as bad for calling $6.  It may very well go back to $4-$5 but they don't want to take the risk making that call.  Analyst price targets are pretty useless across the board.

[Ranger56]

Hey dt.. whats your outlook for the current quarter? I am watching for no cash burn, breakeven at least, more confidence they have enough cash generation to service their debt. and no more dilution (until the business model proven and share price much higher). If not this quarter, when might they get there? There has been so much surprise disappointment, dilution, lack of trust in the CEO over the

[dt_core]

From the last earnings call some of the segments were expected to post results somewhere in between Q2 and Q4E. GIven that and looking at some of the growth rates I'm expecting revenue of $19M to $19.5M and Adj. EBITDA of -$500M to -$800M which implies a cash reduction in the quarter from operations. Where the stock is today it appears that everyone has written off Q3 as being unimportant