The normal method of valuation is of course the P/E ratio, but with low to no earnings, it wouldn't make sense here.
I've advised on a couple of M&As. De.mem is a company that stable revenues, but is not profitable and there is no real potential for explosive growth. It would be an acquisition target for a larger company who either has a new technology they would like to bring to market and wishes to use De.mem as a vehicle to do so, or a company just seeking to grow their revenue and hoping to integrate De.mem into their larger organization to look bigger. The latter reason is why I suspect De.mem bought out a bunch of smaller companies. in these scenarios, the base assumption that is we are buying the revenue of the company, and the negotiating starting point that we usually start at is 1x revenue, though I've seen mutilples as low as 0.5.
I would be curious to understand why you think that the valuation is low, and what you are comparing De.mem relative to? What do you think would be a good multiple to use? Cheers.
DEM Price at posting:
11.0¢ Sentiment: None Disclosure: Held
