JIN consider this: JIN jumbo interactive is a company that owns...

JIN consider this: JIN jumbo interactive is a company that owns an online lottery website called ozlotteries.com. The company recently got rid of a really badly losing software division that was holding this rapidly growing web based lottery business back. They have recently issued guidance of $4.4M NPAT FY11 and since the market capitalization is about $18M (March 2011) that means JIN is trading at 4 times FY11 NPAT (earnings PE 4) JIN revenues are growing at about 20%pa and the NPAT margin this year will be 6.3% Carsales.com has over the last ten years has got its NPAT margin to 38% (about six times as much as JIN will be this year) and REA 26%. Carsales.com started with a much lower margin too and because websites are a low cost business it means they can get their margins up to these heights like carsales.com. If the topline(Revenues) grows at 15%pa over the next 5 years it could mean that if management is good with cost control the bottom line (NPAT) could grow at 30%plus pa. Consider a potential 30% grower at PE 4 with a PE expansion to PE 12 (3 times).