Hello fellow holders, Two links from NYU Stern with common...

Hello fellow holders,

Two links from NYU Stern with common valuation ratios for various industries:

(i) Price Earnings ratio: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/pedata.html

For Software companies, the market currently values firms at multiples ranging from 29 (Software in the "entertainment" category) to 137 (software in the "Internet" category). I think DCC is definitely more in the "Internet Software" or "System & Application Software" category, so the ratio of price to earnings we should be looking at is in excess of 100.

If the company generates earnings (profit) of 1 million AUD for the full financial year, and the share price stands at 0.2 AUD, we get the following ratio:

Shares outstanding = 178,100,000. Earnings = 1,000,000. Earnings per share = 0.00561 AUD.

=> Share Price to Earnings ratio = 0.2 / 0.00561 = 35.65.

So we'd deff be undervalued quite massively, if we turn a profit (and I hope we will, even if it's the modest 1M AUD - it'd show the company can manage costs well and has discipline, and it'll send a strong signal to the market, based on which a tangible valuation ratio can be computed).

The above valuation would be based solely on the cash generated by DigitalX Direct, so it wouldn't even take into account the potential positive cashflow generated by DigitalX Pocket in the future (there are also forward looking P to E ratios).

(ii) Price to Sales ratio: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/psdata.html

In the Software categories, this again varies between 4.7 to 6.97. DCC is currently valued at 1 * sales. So even here, we're undervalued by a factor of at least 4.


The key now for the company is either: (a) to have generated a positive cashflow by the end of the financial year, or (b) to convince the market that the deals signed will generate substantial positive cahsflows in the future.

I think either way, by the end of the financial year, we should be looking at approximately 4-fold increase in the stock price (if the market alligns DCC valuation with the rest of the market!)

I can imagine the stock price would fall only if DCC burns all the cash and turns a loss again, and in addition the deals signed turn out to be garbage I don't think that'd be the case though!

DYOR (and don't blame me pls if this prediction doesn't turn out correct - make your own decisions! ,

Nice weekend,

J.