The market is going nuts over IRI shares this morning, up 15% to $2.27 in early trade following news the company will beat top end guidance...but only by a whisker! 

What are IRI shares worth?

One analyst for Simply Wall Street is bullish on earnings growth over the next 3 years forecasting earnings of $20 million in FY2023 (see chart). This represents a 180% lift in earnings over FY2021 earnings ($7.1 million) but 20% lower than FY2020 earnings of $24 million.

Assuming IRI can achieve this turnaround by successfully launching new cloud-based products, lifting recurring subscription revenues,  by adding new customers with new solutions - including support for the Microsoft Teams and Zoom environments, and a new solution for Webex (released in June), what would the stock be worth?

Assuming Share Value = Earnings/share X PE

2023 Value = $20 million/172 shares X 27^ = $3.13

Discounted at 10% per year = $3.13 X 0.8 = $2.50

^I have used a PE of 27. I think this is reasonable if you believe in the turnaround story of 32.7%/year earnings growth over the next 3 years, consider last year's ROCE of 20.3%,  and consider IRI should be close to debt free with $5.5million in the bank.

In summary, I think IRI are getting close to full value assuming the turnaround story plays out!

Disc: hold shares in SM and RL portfolios.