Originally Posted by
sommelier
I think you'll find that in the NZ tech space share prices tend to ramp prior to results, and depress quickly after results, as small time speculators (us) realise how absurd our growth multiples are. In the last two years most results announcements in this space have been preceded by other positive news (sometimes pretty weak), putting a fire under the dream of success and generally ending with the stock overbought. While we can invest based on hopes and dreams - and such speculation can float the price of these stocks (VML, SNK, ATM) - the cold, hard, and generally disappointing numbers are repeatedly a wake up call. It makes sense to trade VML based on the timings of announcements, the possibility of success (with McDonalds in particular) and the possibility that ASX speculators are even more insane than we are.
It does not make sense to trade VML on the basis that the SP will increase after the results (which is likely to be the second week of June).
If the results are SPECTACULAR and show an ARR of (hypothetically) 10x FY2014, then we are looking at $5m of revenue with a corollary loss of that is likely to be at least that amount (see FY2014, with $512k revenue and profit of -$2m). The question then is, at 2.5cps (mCap $36m), what do the fundamentals say about this company? The NASDAQ currently has an average (historically high) 23x p/e. If we used this as a basis for assessing our growing tech company, then we would need a PROFIT of $1.5m to justify the 2.5cps price. And that's if the number of shares remains static, and it has already been indicated to us that it will increase.
The reality is that growth is rapid, exciting, and promising, and there is a good chance that this company will be very successful in a niche tech space. This is what should motivate your trading strategy. Backing your judgement pending the company's full year announcement looks to be a poor strategy based on the trading patterns on this type of stock on the NZAX in the past few years.
The people who make the most money off this stock will likely be the traders that happen to time their trades extremely well, especially around announcements. The people who lose the most money will have a similar strategy. If you notice a huge spike after an announcement, keep a very close eye of the weighted average price, and if you think its approaching the top of it's "hype value" curve, sell some.
For me it makes up a far-too-large 15% of my portfolio, but as I think I got in at a really low price I'm gonna hold it for at least 2-3 years, hopefully enough to snag a 10 bagger based on much more robust fundamentals.
DYOR.