@zhanginu@kickit2meThose valuation formulae are pretty...

@zhanginu@kickit2me
Those valuation formulae are pretty simplistic IMO. A few points if you want to educate yourself on valuing SAAS:

1. XRO international is a much inferior business to ANZ- but it is improving. (ANZ is much better). These are the metrics


2. If you look at fundamental valuation you can see that (my own workings below- please do for yourself as you see fit- for a COE of 10%):


Anyway basically there is no fundamental method to value as the g>WACC otherwise you get infinite value.

The key take home message that people do not appear to understand is that the growth rate, by far, is the biggest determinant of fundamental value. The reason people ignore the growth rate is that it is very hard to ascertain (otherwise it would be easy to make money).

So the real question is- in the context of a business that is pre-reported earnings, how can you guesstimate earnings. If you backsolve enough equations you will arrive at IMO some fundamental truths. For instance, for any given growth rate you can determine the expected price/sales ratio if you know the expected operating margins of the industry (simple mathematics).

So the question to my mind is what kind of growth can we expect moving forward? A hard question for which there isn't an obvious answer but as @madamswer pointed to above- steady state cashflow (PE of 10) implies a revenue of 10m, which on 30% growth is 3 years away, and I suspect based on past results and given new products, it could be sooner. The part I disagree with is the multiple applied in that situation- ie if there is a 5 year track record of execution and a fundamental top-line growth rate of 30%, the market will often apply a 30x multiple in that situation. As operating leverage will emerge around that time, the earnings will then grow substantially faster than revenue, so even if 20% growth can then be maintained, bottom line improvements of 40-50% can occur leading to multiple expansion.

Whether Spectur can achieve any of these things is anyone's guess!