Charting Thread, page-9

Yes fair point Veritas.

I am playing with some figures and would welcome some feedback. Assuming that price is not always indicative as fair value - it would also be fair to assume that shares become more risky, not less, as their prices rise and less risky, not more, as their prices fall.

So looking at a chart to validate a shares value is one part of the story - usually near term direction only - and whilst it appears to be heading lower with Cleanspace I am sure you agree it can turn quite quickly depending on market sentiment and market belief in the earnings growth profile of this company. A simple announcement updating the final rule of the ETS (due this month) could spike the share price. The August final results presentation with no forecast may send it lower? or higher - depending on June/July sales volumes. Ultimately future sales penetration through key global channels and continued consumable sales (with a clear forecast per unit based on the current global units being utilised) is the growth story here. I think the chart and current price indicate that the market is uncertain of the immediate future success of the company, and being a thinly traded and tightly held register it is changing hands at the tail end. Escrow release will be interesting. I am hoping to purchase more at a lower price as well but see this as an opportunity for a great little stock that I expect to deliver continued value years from now.

In terms of fair value of the company - well that is really an assessment of what future earnings 'may be'. Lets look at the PEG ratio - where less than one indicates fair value or better - for a company anticipating growth. For me - this is the profile of Cleanspace - utilising RESMED as a comparative story.

Cleanspace's net income for the past 4 years has been: FY18: -1.1M FY19: - 1.07M FY20: 7.36M FY21: 17M Average: 5.55
Utilising this average the next twelve months PE ratio is 110/5.5 = 20.

Cleanspace growth rate utilising the above net income:FY18: 50.7% FY19: 6.2% FY20: 785% FY21: 150% Average: 357%
PEG = P/E / Earnings Growth Rate = 20/357 = 0.05. indicating incredible value or I am wrong and the market is right - that this company has no future.

Also to be fair - if I remove FY20 and FY21 as anomalies and include a more reasonable indicator and include a new average with FY22 expected earnings at a reasonable 5.5m (as per the forward PE above), the new growth rate is:

Cleanspace growth rate removing peak COVID fear years FY18: 50.7% FY19: 6.2% FY22: 550% Average is 202%
The updated PEG ratio removing COVID and utilising a next twelve months estimate PE at a current price of 1.45 and market cap of 110:
PEG = 20/202 = 0.1 - very low indicating great value

Thoughts - is this too simple?