Pinned valuation:
Management targeting 5 year goal of $300m - $500m annual revenue.
Assume 3 scenarios reach $500m, $300m, and $205m in 5 years time. Assumed the share count will double (management incentives, capital raises etc) Assume net margins 10%. Assumed the chance of achieve $500m at 25%, $300m at 50% and $205m at 25%. Discounted at 25% due to so many variables that could affect valuation.
Valuation $0.726
Currently hold position IRL and would like to grow my position if shares pull back from current price for margin of safety!!
25% discount rate + revenue assumptions below managements forecast already seems like a pretty big margin of safety. (Esp given your valuation is well above today’s share price?
What are the key variables you are trying to protect against? Significant further dilution? My biggest concern is margins and I want to see some more info on the product mix being sold (i.e. would love to see more insights into the level of sales of the stuff where a large amount of software revenue can be attached).
DISC: Held IRL (quite a big position relative to most other small caps)