Short Activity in PNV, page-1394

The elephant in the room with PNV has long been the P/S ratio relative to the rate of revenue growth.

Back when the SP was $4 and prev year's revenues were $22M, the P/S was about 115. This sort of figure can only be justified by an expectation of exponential growth. The market was expecting (certainly I was) approx. 2 - 3 times year on year sales growth for the next 3 or 4 years. Instead, what we have seen is approximately linear growth averaging about $8M/yr.

If the market had known that was going to happen, the price would never have cracked $1. If I had known that was going to happen, I would have already sold way before the peak. Instead I sold way after the peak, for probably about the same end result.

So currently The P/S is around 27 using SP = $1.26 and FY21 result of $29M revenue. If revenues lift to say $40M this year, then the P/S will be 21 (@ SP = $1.26). This still has an expectation of substantial future growth factored in. A lot has been invested in the sales team internationally resulting in only linear sales growth. I think this has come as a shock to many investors. The market is clearly losing faith that an exponential take-off in sales will occur and the SP is realigning to this new expectation.

Remember too that we are still just talking about sales revenue here. The assumption has also been that the transition to profitability would be a simple matter of easing off of the sales accelerator peddle when the time was right. I think that was assuming exponential sales growth for linear sales team investment. Sales has proved to be much harder work than anyone expected. The transition to profitability no longer looks so guaranteed.

The company has a great product that I felt really good about supporting. The glacial rate of progress on approvals and lackluster sales have been a great disappointment to me, not just because it caused the SP to go into decline, but also because the product has not been reaching so many who need it.

Hopefully things will improve this year as COVID headwinds dissipate. But the company would really have to pull a rabbit out of a hat at this point, to turn around the current decline in the SP.