Many? I can think of two (XRO and OHE). "Many" must be more than two or three or four. Can you name at least 3 more companies on the NZX with a marketcap over $250m which never made a profit?
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Sorry BP, I can trawl through all the stocks on the NZX to answer your question if you like - let's just say I should have said 'some'. Those 2 spring to mind, particularly OHE. I remember when they floated, a darling of some private equity firms, and their SP has gradually headed south over the last 15 months.
SLI has been worth as high as $175m market cap and apart from 2012 has experienced y-on-y losses. I wouldn't class sp movements too dissimilar to PEB, in that market sentiment has moved it around like a rag doll.
Vista Group, although having experienced slight profitability for FY15, decided not to pay a dividend (rather forgoing paying one until FY16). Is their market cap, as high as $480m in late 2015, also justified at this point?
I think you both have a point--Its a fair call Meister--Its pretty flimsy evidence for a share price rise like this ..and WTBD--I think market Sentiment is something most would agree on at this stage--perhaps many were waiting for so long that this news lit a fire--of course the next results are the only way to tell on fundamentals...meanwhile who knows where the herd will go --guess it depends on more announcements and whether things will translate into sales---Whether the USA will take notice of a New Zealand districts take up of one of the diagnostic products(after tests)remains to be seen.(where did you say New Zealand was again?)
Welcome back Bulls--it was boring without you:)
Hi all, would like to add a TA perspective to this thread. Certainly not an expert by any means but interested in TA theory. Please feel free to add your own interpretation. Recent price action has confirmed a breakout of the down-trend trading range initiated in Sep-15, triggered by recent FA catalysts it would seem. Strong support around 0.40 mark. SP has hit a resistance level at 0.65-0.66 so will be interesting to see where we head next, with stronger resistance around the 0.90-0.95 region, confirmed by 38.2% fib level.
From an FA perspective, this company has plenty of potential but needs to realise that in the timelines that have been provided. These milestones are ambitious, but have been spoken with such confidence and repetition that SH will not forget them in a hurry.
Disclosure: holding, and holding tightly (in for the long-haul).
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I think people need to be financially careful with my beloved PEB,
I think we are 12-18 months off another CR. tho, I'm not sure where its coming from, NZ or USA.
A few holders might be selling anticipating the next CR.
I see this baby heading the right direction, but it will take sooooooooooooooooooo much time and another 50 mil.
Pathways and guidelines are very behind the times, two back one forward.
I've licked my finger, chucked the sucker in the air and value Peb between 50-500mil, one announcement could stuff those numbers in any direction.
Good luck people!
It isn't necessarily about the lack of profit, but also about the growth rate. I realise it is 'early days' for PEB but that was perhaps my point - there is very little sales growth evidence and therefore the valuation of $250M is heavy speculation. That is fair enough for some, but due to the repeated failings of this company to live up to their own hype, I think speculating to the tune of a $250M valuation is a dangerous game. I am looking for solid sales growth figures before I start believing the story again.
Sales growth from $1.4M to $1.8M was reported last half from the half immediately before, and was disappointing. If they hit $5.5-6M in product sales for the full financial year, and finally announce the completion of all the agreements we are waiting on, then perhaps I could see them being valued greater than $120M. Less than that and the growth story just isn't there (yet?).
Meister, I understand your direction regarding growth, but this is not small margins milk and its not software. Our life saving product is not sold to every day joe's. Our margins are large once a network is developed. The NZX has no other product similar, hence it might be over valued compared to international companies! valuation is a tough one.
With those thoughts in mind, on option would be to hold (while the market is turning positive--hype?) and perhaps sell before the next results.(in anticipation they will not support the sentiment)--nothing is without chance ,but if the results are glowing(It would be interesting to know how many think they will be) you could buy back in--it would be more expensive ,but you would have a better idea they are on track.
Agree - though I am not sure whether I would call it after more than 10 years for PEB still "early days". Sure - things move slower in the medical industry, but even there is a decade a long time.
As far as the valuation is concerned - I guess the answer is quite easy.
Just take a DCF template and feed it with a handful of assumptions. Fiddle as long as you like with the assumptions and if you get a SP value above the current SP, than ask yourself, whether your assumptions look still reasonable (i.e. (1) nobody in history achieved a similar growth and margin, (2) only a handful of corporate top achievers did similar things before, (3) a number of companies in the past did better than your assumptions or (4) any company not run by an absolute moron could do better?
If you come up with (3) or (4), than go for it and buy some more. If you come up with (1) or (2) - than ask yourself, how likely it is that PEB is equal or better than the most successful companies in the world. If nobody did it before, than maybe a lottery ticket is a better investment - at the end, there are people around who managed to win the lottery before.
Here is my attempt: I assumed that PEB will reach this year the 9 million revenue some analysts claim and keep growing its revenue from there by 75% pa (remember - this is wishful thinking, it never ever before did that), slowing down over 10 years to a more sustainable 12% (still quite fast, but not impossible). I assumed as well that margins stay roughly in the area where they would be today if they would be able to sell their tests (o.k. in reality costs per test will come down, but price as well) and if we assume that they keep growing from 2026 with the 12% rate for the next decade until 2036, than my DCF says that the share has (assuming a high risk discount rate of 16%) a NPV of 37 cents.
Ouch. Obviously Mr. Market is still more optimistic than that - or does not do DCF. Obviously - the number of parameters to fiddle with is unlimited. Is the margin really likely to stay in the regions where optimists think it might end up with? Will PEB take off at all? Will the world have in 10 years a much better test and nobody using Cxbladder anymore?
On the positive side ... admittedly - this calculation is very sensitive to the assumed initial growth rate, If I start with 100% (instead of 75%) initial growth rate pa (i.e. 18 million revenue in 2017), than the NPV of the share would be already 87 cents.
Oh yes - and if I use a 300% starting growth rate (which would bring them close to the 100 million revenue they promised in 2018), than the NPV of the PEB share would be nearly $38. What a bargain ... buy them if you trust their promises;).
Would be interested to get from the optimists on this thread some ideas what revenue growth and cost they put into their DCF to convince themselves that it is a good idea to buy PEB at current market price.
BP - The days are long, but the decades are short.'
In reference to your "10 years for PEB still early days' comment