I spent the past three nights reading the entire thread from start to finish. It reads like a story from Adam Smith's The Money Game. I don't think there is any other stock in VB which has been covered so extensively, by so many interested parties, tracking the business and share price from its days of obscurity, to celebrity, and then back again.
Over a 9-year period from FY06 to FY14, when its earnings peaked, Penguin's average net profit is about $4.65m per year. Back in FY14, it has no debt and $35m in cash. Let's say I apply a multiple of 8 to this earning and add in all of the cash, I will get a value of about $72m. If let's say I am a conservative investor who only pays 50 cents on the dollar, I will be paying $36m, or $0.05 per share.
The FY14 results were released on 25 Feb 2015. The share price on 27 Feb 2015 was $0.21 (from google); based on total 660,518,012 shares, the market cap was about $138m.
Of course, one could say that the business environment from FY11-14 was far different from FY06-10, hence one should not take into consideration the poor numbers from FY06-10 to calculate its value. I concede that in a bullish environment, it is not easy to remain objective. I have lost enough money during my early investing days to be wary of cyclical businesses (STXPO, why weren't you bought out?). I have come to realise that there is some money not meant for me to be made. I shall just stick to what I know and refrain from being green-eyed (or is it red?) when the cyclical upturn arrives.
And probably, very few will be so conservative in their calculation of a business' value. You can say I am kiasi, and I will agree with you. If we were this conservative all of the time, the only time we can find businesses of such valuation is during periods of market crash. But of course, there are exceptions. And it is up to us to discover them.
I think newcomers will benefit alot if they read this entire thread. Just by seeing how under-valuation can become over-valuation as the business environment change, is one amongst the many valuable lessons here.
For now, I shall be keeping an eye on this bird.