BIG (ASX) And the push to $3 begins

Originally posted by musky45 ↑

I’m not having a go, but $41M is nowhere near rational. This stems from massive misunderstandings of the relationship between cash receipts, “cash profit” (which is a furphy), and NPAT (the “E” in P/E ratio or EPS).

If we assume that your $41M is EBITDA (cause it removes any anomalies due to accrued losses etc) and a 20% EBITDA margins, $41M would require $205M of revenue. We haven’t even hit $100M annualized revenue yet (might get reported today though).

Cash profit is misleading. Cash profit compares the cash received in one period with the expenses in the same period. The diff between the two is free cashflow or ‘cash profit’. But BIG is not a cafe, they run accrual based accounts.

It makes it hard to analyze properly at this early stage, but Once we have more sets of accounts we can start to model a bit more accurately. Plus the USA being on month to month payment will help.

Bigs cashflow and growth is indeed amazing and why I’m invested, but we don’t know how that all translates to profitability (just quite yet)

I am just concerned that people’s investment decisions are led by the wrong numbers - it sets them up for massive dissapointment (in the best case), and massive loss in the worst.

Fingers crossed for a solid Ann today.
Take it easy.

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Great explanation, and investors should get the differences clear in their heads. With BIG it is confusing at this early stage due to the amount of cash being received upfront for a subscription based product, thus leading to large amounts of deferred revenue. But I think it is misleading to solely concentrate on revenues and profitability in this case due to the fact that the majority of costs to provide the service fall in the first 3 months. If BIG did not encourage up front payments then they may have had a profitable business but their growth could have been significantly impacted by cash flow restrictions and there would have been a few more CR’s (due to the cash flow side of things, they have needed to pay for services with shares. Good idea but due to the massive rise in SP even management are probably starting to question if this was wise. now they have cash flow and cash in the bank, I doubt they will be giving any more of the business away for services rendered).
Cash in the bank can be used to grow the business, future revenues cannot (other than through taking on debt).