SHJ 0.00% 69.5¢ shine justice ltd

Actually there is a good reason, provided that revenue can be...

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    Actually there is a good reason, provided that revenue can be assumed to be a reasonable approximation of fees that will eventually be received. The current value of a company is the adjusted future earnings of the company. The problem with annual reports is that for most companies they represent a look in the rear view mirror and we need to predict the most likely future outcome based on the past.
    For Shine we have a slight advantage in that a large percentage of cashflow from revenue will be received in future years. This means that, provided they've accurately assessed the liklihood of winning cases, we have a glimpse into the future earnings of the company for the next couple of years. Cashflow relates to money that was received at the time of the report (past), a large percent of revenue relates to money that will be received as cash in coming years (future).

    So for a simplified example if they just made a large aquisition there might be a sharp increase in revenue, but cashflow might go up by a much smaller amount, but this would be because the fees earned will go up in future years but we don't have the money yet. This matters quite a bit to the valuation. Likewise if business drops off sharply the revenue would be a leading indicator as we would still be earning cashflow from prior years when Shine was more busy.
 
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