Just joined the register, page-6

Hi Williak,

I realise you posted this question some time ago however I would like to propose an answer. The long term average PE for the Australian market is roughly between 14 and 15. Based of this and using TPN's FY15 forecast figure the market cap should be closer to $135m...in other words less than half of what it is. So as a rough ball park figure, take the $2.50 IPO price and half it and it would start to make a little more sense.

But this is not entirely true. If a company has big growth expectations, then the market is happy to pay a premium expecting the payoff to come later. If we look at it that way and we expect TPN to grow to a valuation that is average for the market, then the earnings of TPN would need to go from where they are currently forecasted, just under $10m to just over $20M . In other words they have to grow by over 100%. Currently they have sold 3.2m licences in Mathletics and this represents 80% of their profit. So they need to sell another 3.2m licences to get close to doubling the profit. OK that sounds plausible. Let's check the ABS to find out how many school kids are in Australia

"In 2013 there were 3,645,519 students attending school in Australia, representing an increase of 55,533 (1.5%) on the 2012 figure. This follows the 1.4% growth recorded in 2012, and comes after a period of several years during which student figures grew by less than 1% per annum."

http://www.abs.gov.au/ausstats/[email protected]/Lookup/4221.0main features42013

I know they sell overseas, however they would need 100% take up of all students in Australia and this would only be about half the number of licences they need to sell to hit the earnings figure. This gives a little perspective on the whole thing. I agree with nih123 and honeybadger23, this stock is currently way overpriced.