Everyone has their own valid and unique methods of valuing a company.
Personally, I think comparison analysis can be useful but I do not subscribe to it.
It has pretty difficult headwinds in my mind.
1. It assumes the market accurately prices securities
This is rather presumptious in the small cap space. Not many 'reputable' institutions cover these companies. I was recently on the BFC thread coming into the announcement as a disclosed shorter and it just astounds me how easily investors can value companies on imagination rather than solid numbers. All they read was 'milk' and 'china' to send the stock on an absolute field day.
I am not saying 1PG does not deserve its valuation. I do not follow the company.
At the end of the day it is cash flow that makes investors rich.
I could not care less what other people value the company as long as I am open to be persuaded by rational counter analysis.
2. Valuing qualitative factors is significantly more difficult than valuing cash flows.
Ask your partners what they think their wedding rings are worth and they will say it is priceless.
Qualitative factors present significant difficulties in valuation.
What is a database worth? What is a talented management team worth of a company not making a cent in revenue?
How do we put a value on ideas?
I believe it can be done but it is significantly more challenging.
At the end of the day demonstrated ability to grow cash flow backed by an understanding of the business model makes for a rather easy valuation.
Some investors look at what houses in the suburb sell for to determine a value yet Australia has a culture of investing emotional interest in property.
My personal approach is that a property should be worth the reasonably estimatable cash flows I would receive from renting it out.
The catch here is that I look at what similar properties rent for rather than what they sell for.
I guess you could extend this principle to looking at the statements rather than the market cap to find value.
Once you can see the cash flows you can make your own independant determination of value without seeking the markets approval.
At the end of the day, all investors know what method works for them. Maybe it is because I (presume) am younger than you guys and have less life experience but I say let's be arrogant on this one.
No matter which valuation method you use they are all pointing to the same star.
As long as we remain open to change of opinion in the face of valid criticism I am calling the market wrong on this one. But they will catch up to us in time
The directors are mining and carving the diamond now to fit on the markets finger in a few years time.
Let's see how the markets react to that proposal
VPC Price at posting:
6.0¢ Sentiment: Buy Disclosure: Held
