AHZ - broker data, page-42

I know you didn't (Suckii did), and i agree, 6 x rev is cheap (compared to peers). Although, i will say that valuing companies on revenue should absolutely be thrown out the door as soon as the company has earnings. Valuing on revenue is only done because there is some underlying assumptions about how much of that revenue will be converted to earnings at some point in the future. Once the market discovers that none of the revenue can be converted to earnings, how much do you think they'd be willing to pay for that revenue?

For example, the list below is all of the Healthcare / Biotech shares in the all ords index (we're not in there because we're not in the all ords index). Take a look at the diffs. Ive got to say, im failing to see any kind of reliable pattern here...

Note: MC is as at June this year, but Rev is from the 2016 FY.
* Revenue is statutory revenue, so not quite "real".
Not entirely correct in any sense, but it serves to illustrate a point.

	Column 1	Column 2	Column 3	Column 4	Column 5
0	Company name	ASX code	MC (000's)	2016 Rev (mill)	MC / rev Multiple
1	CSL LIMITED	CSL	65,048,236	8,138.30	7.99
2	RAMSAY HEALTH CARE LIMITED	RHC	14,747,890	8,684.10	1.70
3	RESMED INC	RMD	14,575,416	2,476.00	5.89
4	SONIC HEALTHCARE LIMITED	SHL	10,094,239	4,962.90	2.03
5	COCHLEAR LIMITED	COH	9,161,848	1,130.60	8.10
6	FISHER & PAYKEL HEALTHCARE CORPORATION LIMITED	FPH	6,077,750	794.1	7.65
7	HEALTHSCOPE LIMITED.	HSO	3,767,207	2,276.20	1.66
8	ANSELL LIMITED	ANN	3,522,063	2,118.00	1.66
9	PRIMARY HEALTH CARE LIMITED	PRY	1,950,159	1,613.50	1.21
10	MAYNE PHARMA GROUP LIMITED	MYX	1,708,552	267.5	6.39
11	REGIS HEALTHCARE LIMITED	REG	1,201,434	134.4	8.94
12	SIGMA HEALTHCARE LIMITED	SIG	924,705	4,433.20	0.21
13	AUSTRALIAN PHARMACEUTICAL INDUSTRIES LIMITED	API	906,131	3,844.70	0.24
14	MESOBLAST LIMITED	MSB	898,693	55.8	16.11
15	ESTIA HEALTH LIMITED	EHE	802,656	442.8	1.81
16	SIRTEX MEDICAL LIMITED	SRX	783,518	232.5	3.37
17	NANOSONICS LIMITED	NAN	771,128	42.8	18.02
18	JAPARA HEALTHCARE LIMITED	JHC	557,647	325.3	1.71
19	PRO MEDICUS LIMITED	PME	556,420	27.5	20.23
20	VIRTUS HEALTH LIMITED	VRT	436,510	261.1	1.67
21	MONASH IVF GROUP LIMITED	MVF	414,296	156.6	2.65
22	REVA MEDICAL, INC	RVA	356,064		-
23	MEDICAL DEVELOPMENTS INTERNATIONAL LIMITED	MVP	309,620	15.5	19.98
24	CLINUVEL PHARMACEUTICALS LIMITED	CUV	307,415	6.2	49.58
25	IMPEDIMED LIMITED	IPD	296,361	5.8	51.10
26	PACIFIC SMILES GROUP LIMITED	PSQ	287,268	84.9	3.38
27	STARPHARMA HOLDINGS LIMITED	SPL	273,128	3.8	71.88
28	INTEGRAL DIAGNOSTICS LIMITED	IDX	232,071	165.4	1.40
29	VIRALYTICS LIMITED	VLA	226,186		-
30	AIRXPANDERS, INC.	AXP	192,502	0.8	240.63
31	BIONOMICS LIMITED	BNO	185,372	8.1	22.89
32	RESAPP HEALTH LIMITED	RAP	184,947		-
33	SOMNOMED LIMITED	SOM	174,760	44.1	3.96
34	ONEVIEW HEALTHCARE PLC	ONE	174,637	13.1	13.33
35	1300 SMILES LIMITED	ONT	151,542	36.2	4.19
36	INNATE IMMUNOTHERAPEUTICS LIMITED	IIL	144,401		-
37	TPI ENTERPRISES LIMITED	TPE	142,513	7.6	18.75
38	ELLEX MEDICAL LASERS LIMITED	ELX	131,444	73.1	1.80
39	COGSTATE LTD	CGS	129,584	27.3	4.75
40	PARAGON CARE LIMITED	PGC	128,714	93.3	1.38
41	COMPUMEDICS LIMITED	CMP	123,128	37.5	3.28
42	POLYNOVO LIMITED	PNV	118,240	3.3	35.83
43	OBJ LIMITED	OBJ	87,002	1.3	66.92
44	APIAM ANIMAL HEALTH LIMITED	AHX	66,777	54.1	1.23

Oh, and the table below is AHZ data.... again, i'm failing to see any kind of revenue multiple rule or pattern here (but perhaps i'm just dumb)

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6
0		2013	2014	2015	2016	2017 (Est)
1	Revenue	7.4	7.9	10.2	14.1	22
2	Shares on Issue (M)	112	146.4	185.5	196.3	256
3	June 30th SP	0.46	1.32	0.7	0.325	0.28
4	Average SP		0.89	1.01	0.5125	0.3025
5	Market Cap (M)	51.52	193.25	129.85	63.80	71.68
6	Average MC		122.38	161.55	96.82	67.74
7	MC Rev Multiple		24.46	12.73	4.52	3.26

*Nb: average SP / MC isn't really correct, as i only took 2 points, but again, it serves to illustrate the point.

I am currently valuing AHZ on a whole set of assumptions about how much revenue will grow by, how quickly, gross margin improvements, cost control, future earnings, and how much the market is willing to pay for those earnings.

Rules of thumb are good in certain circumstances, but applying a "rule" of 6 x revenue to value AHZ (or any other company) is just ridiculous.