(08-12-2013, 10:29 AM)CY09 Wrote: Extrapolating the company's cashflow for 1st half to full year,
Free cashflow is about USD5.65M (I ignored its recent USD 3M acquisition and working capital changes [approx. USD 2m]).
This translates to about expected 2.9 cents of free cash flow generated. Using current price, that's about 6.75X. Is it considered value for money?
Normally what is the P/FCF range that investors will consider as bargain
I am not sure how you arrived at your numbers. I have a different set of numbers on my end. Nonetheless, 6.75x P/FCFE translates to a 14.8% FCFE yield. That by most standards, should not be considered expensive, imo. After all, where can you get that sort of yield - in a bank deposit?
Whether it is a bargain/value for money, will require a more thorough assessment of the sustainability of the cashflow and the ability of management to turn the original Radiance business around, integrate it & grow the consolidated group, in my view.
Admittedly, this is not a classic value stock as it seem to lack certain characteristics such as a strong competitive moat. And the margin of safety does not appear to be that great, imo. This is due to a lack of visibility in general, amongst other things such as competition, capital allocation and acquisitions
Valuations are on the low side. But only if you assume that earnings could normalize to previous levels or go even higher.
Overall, one has to assess whether the risk/reward make sense, based on one's own calculations.
Caveat emptor.
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