I bought in on this announcement. Two new work plans is two more dice rolls in my way of thinking. We cannot know how hot or otherwise a new product will be until the market has a look at it. Maybe the first roll has been a 2, but we will not know for a few years. Hoping one of the rolls gets a 6.
So rolling a 1 is worth nearly nothing in revenue terms, but there is the research, experience, and relationships that are potentially very valuable. Rolling a 6 could be worth $50m per annum - just to make something up - I'm sure there will be better guessers than I am.
Bodyguard is like a dice roll, all of the opportunities are in a way.
So with these new work plans - the company is worth more due to the various odds. This is a fractal event. Who knows what the market will decide the value is.
So my crap maths says (as I am trying to keep it simple) . . . the odds of rolling a 6 are only 5% (I should have used a 20 sided dice - lol), and revenues are $50m pa, and costs are near zero relatively speaking, and the revenues run for 15 years, then a 6 is worth about $2.5m revenue value (adjusted for 5% odds), a 5 worth $250k (say), a 4 $50k, and 3 to 1 worth negligible revenues. Then taxes and bonuses etc take 40% of that, and we end up with 2.8 x (1-0.4) = 1.68m weighted annual npat per product, and then multiply by 20 (for the sake of a multiplier) for a tech co, makes about $34m each, so $68m extra market cap for 2 new work plans. Then there is the likely new work plan which is worth something too.
Obviously even with better inputs we still can't predict the future. I could be out by 500% in either direction on the value of the new work deal. My point is to forget the incoming revenue short term and focus on the weighted opportunity value. The past results are not really indicative of future results, as the world doesn't work that way when it comes to new consumer products, especially in a high margin, potentially winner take all, domain (from a segment point of view) like women's cosmetics, etc.
I suspect the SP will factor in these odds over the next few months. But who knows for sure? Not I
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