A company that is in growth phase can easily achieve 50% year on year for 5 years.The crucial part is the starting base. In fact many start ups that is just at the stage of commercialisation can get well over 100% growth for the first 3-5 years.
If revenue starting point is $1m then 50% year on year for 5 years means on the 5th year its $7.5m revenue. In fact one large contract could see this achieved in a year (pending manufacturer ability to supply).
If the company is already achieving revenue of $150m (already has a significant market share) then a 50% year on year growth means $1.14billion revenue on the 5th year. This would be less probable. At a certain stage continual growth of 50% is impossible.
If you are taking a industry leader whose revenue is already say $3billion then you cannot expect them to grow by 50% year on year for 5 years because they will be bigger than the market itself.
If WHA can secure a large sales contract with say a known distributor it can achieve $20-50m in revenue over the next 12-18 months (depending on its suppliers).
I suggest that you read more on how to value growth companies. You are applying a valuation formula of a "cash cow/mature" company to that of a growth company.
The ultimate question will be "can WHA achieve the milestone". Can WHA get the contracts and work with their supplier to achieve this. This is where the risk is. If WHA can achieve this then they could be a mid-tier company in the $200-300m range. If they cannot then their valuation could be much lower than it is now. That is why its called a SPECULATIVE stock. BUBs would be in the same category. Most likely BAL is trading at such a low multiple is because the market is expecting that BAL will be losing market share in the future.
Anyway I am trading the stock and if the share price continues to rise (which I hope) then it seems that the market is pricing in the probability that WHA will get a major backer perhaps? Or they will get a major order from someone that will see the company catapult itself as a player in the industry. Only time will tell. I just hope that I can sell my shares for a higher price than I purchased them. I don't give a toss if its through fundamentals or by a pump and dump.
WHA Price at posting:
25.0¢ Sentiment: None Disclosure: Held
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