earning and pe, page-2

Here is another interesting post by Lord elpus, thanks Lordy.

"In answer to my own question about PDN I found that they do not have a quoted p/e ratio but do have a p/s ratio (price/sales). The p/s ratio comment is this "Price/Sales Ratio The current price divided by the last actual sales revenue per share figure. Along with the Price/Earnings Ratio, the Price/Sales Ratio can be a useful comparative valuation tool. Valuation on multiples of sales can be handy when companies are in the early stages of their life cycle and earnings are yet to be attained."

PDN's p/s ratio is 28.11 apparently derived from sales of 16 cents per share ($4.50 / 16 = 28 approx)

If EXT is expected to have sales of US$1 billion (14-15 mill lbs x $70/lb) what number of shares would be on issue? If EXT needs about $700-$800 million to get to that stage and can raise capital at about $10/share (reasonable?) then they would have to issue another 70 million to 80 million shares so let's say there are around 300 million shares at that time.

If you have US$1billion in sales then you have AUS$1.25 Billion which would be sales of about $4 per share. Now if you assume that EXT will be worth the same p/s ratio as PDN then you would have to say EXT would be trading at $4 x 28 = $112 per share.

Of course I am (as usual) throwing around broad brush numbers and assuming a hell of a lot but I feel I am amongst friends here so you will allow me some latitude .

However you look at it, if these sort of figures would be achievable in 3 or so years then someone who wants to snatch this golden goose today is going to have to pay a bucket load more than the current share price. My advice as usual is buy if you can afford more shares and if you can't then for God's sake hold them because you are going to be rewarded. "

In fact, there is a earning forcast for PDN on Fnarena, 5 brokers forcast 14.5c(average)earning for PDN next year(2010)