|
Investment Highlights
Market Opportunity
DigitalPost Interactive, Inc. operates in the fast growing Web 2.0 (user generated content) market. Expansion of this segment of the Web 2.0 market is being driven by:
- Growing demand for digital cameras and camcorders
- Increasing number of consumers who wish to share digital content on the Internet securely
- The growing consumer demand to find a single location for storing their user-generated digital content
- Rapid growth in the number of consumers participating in online communities
- The increasing penetration of high-speed connectivity to a broader base of consumers
Future Growth Strategy
To drive future growth, the Company is taking various initiatives like vertical integration, expansion of products and services offerings, promotion of brand awareness and international expansion. DigitalPost Interactive plans to introduce its platform and tools into additional verticals through strategic partnerships and acquisitions and to develop its technology to include forward-thinking functionality and benchmarks increasing the widespread adoption of its platform and tools.
The Company intends to generate high visibility of the DPI brand through new and existing channels, which include word-of-mouth marketing, print and online advertising, affiliate and referral programs, search engine marketing and complementary strategic alliances. Also, the DigitalPost Interactive plans to develop additional business opportunities through international expansion, targeting consumers in key geographic areas where user-generated content is high and where Internet usage is widespread.
The Company’s goal is to grow its suite of Internet services into a premium lifestyle brand and become the potentially leading platform for highly functional, interactive website destinations dedicated to improving the sharing, protection and preservation of user-generated content.
Service Agreement with Disney
Recently, DigitalPost Interactive entered into its second service agreement with Disneyland Resort, a division of Walt Disney World Co., a theme park and resort operator in Anaheim, California. According to the agreement, DigitalPost will design and develop an image processing system that will seamlessly integrate within the new Disney “Dream Home Website” which is already in development by DigitalPost. Disney agreed to pay DigitalPost a development fee of $40,000 plus additional monthly fees for storage costs.
Deal with Online Solutions & Kiddie Kandids
DigitalPost Interactive entered into a 5-year agreement with Online Solutions, LLC, (OS) an affiliate of Kiddie Kandids Holdings, LLC, one of the largest national photography studio chains in the United States. DigitalPost will provide, host, and maintain a new digital family media-sharing service based on its TheFamilyPost.com service which OS agrees to launch through Kiddie Kandids retail stores nationwide. The new online service will enable Kiddie Kandids customers to enjoy their own, personalized family website for between $4.95 and $11.95 a month that they can use to share a lifetime of photos, professional portraits, videos, stories and more. DigitalPost will share the revenues from the site with Online Solutions, LLC.
Westgate Resorts Agreement
DigitalPost Interactive, Inc. entered into an agreement with CFI Sales and Marketing, LLC, an affiliate of Westgate Resorts, the third largest timeshare company in the world. Under the agreement, DigitalPost agrees to provide, a customized, private label version of its TheFamilyPost.com family website subscription service for Westgate, which DigitalPost agrees to host and maintain.
Westgate agrees to market the new family website service to its 500,000 existing timeshare owners and the 300,000 prospects they receive every year. In addition, Westgate agrees to deliver trial subscriptions of the service to every new member they receive. Additionally, Westgate agrees to make the family website platform accessible through one of its corporate websites, which its customers can log in to create and manage their family website.
DigitalPost agrees to pay Westgate 40% of the ongoing monthly net fees received by DigitalPost for active, paying customer subscriptions during the term of the agreement, and 20% profit share of photo merchandise sold through the family websites. The term of the agreement is for two years and automatically renews for successive one year terms.
Partnership with BowTie to Launch Premium Online Service for Pet Lovers
DigitalPost Interactive, Inc. along with BowTie, Inc., America's leading producer of pet magazines and online properties with more than 50 publications, announced a new partnership to market premium, dog-themed versions of TheFamilyPost.com to BowTie's vast audience of pet enthusiasts. Offered through BowTie's most popular online property www.DogChannel.com, the premium sites will retail for between $4.95 and $11.95 a month, giving dog lovers a fun and exciting new way to share their passion with photos, videos, chat rooms, stunning flash templates, and much more.
With the above joint services contracts DigitalPost Interactive will be able to expand its product offering by being a more integrated service provider and improve upon its Web 2.0 technologies and services. These joint services contracts will not only aid the Company in providing a range of services to its clients but also acquire competencies in high-end technology and move up the value chain in the Web2.0 and gain strong domain expertise leading to more business and growth for the company.
Strong Revenue Forecast
The Company wants to leverage its technological skills, strategic partnerships and strong demand for its internet technology services to grow into a leading player in the Web 2.0 industry. The Company has formulated a new business plan that will enable the Company to take advantage of the market conditions and earn significant revenues in the coming quarters. The Company expects to earn approximately $30 million in revenues in FY 2010 by leveraging both internal and external resources.
Experienced Management Team
An experienced and capable management team with strong competencies in internet technologies, web applications and management leads DigitalPost Interactive. The management team will play a key role in formulating business strategy, implementation of new initiatives, forming new partnerships and enabling it achieve its business goals and operating profitably. The Management plans to drive future growth through innovative technology, new products and services, and strategic partnerships.
Industry Analysis
Web 2.0 has significantly altered the way in which people interact over the Internet. They are no more simple consumers of services. They have become creators of content and applications as well. Web 2.0 is becoming increasingly important to the world of Internet, so much so that Alan Calder, the chief executive of IT Governance said, "Company leaders have for too long been burying their heads in the sand when it comes to the importance of social networking. Web 2.0 is now a business reality, and CEOs need to get a proper understanding of its risks and benefits so as not to miss out on the opportunity."
A survey carried out recently by IT Governance found out that more than 40 per cent of the respondents used Webs 2.0 sites for over an hour an hour daily. The magazine Creating Keepsakes estimated that people spend up to $18 billion annually on photos, greeting cards and scrapbooks in digital/physical form. Digital photo processing services worldwide have been predicted to grow to $107 billion by 2009, in America alone they would be worth $30 billion.
This signifies that companies that can utilize Web 2.0 concepts, but are not in yet, are losing out on a huge business opportunity. The applications that have sprung from the Web 2.0 concept range from wikis, podcasts, blogs to Ajax development services to service syndication. Companies can use the principals of Web 2.0, to create various profitable applications along with their customers.
A Company’s ability to understand and implement Web 2.0 models and technologies, determines its competitive edge. Although Web 2.0 was dismissed as nothing more than hype by some industry experts until just a couple of years back, it has grown to be a major part of the mainstream business and is associated with websites that are at the technological forefront. These include big names that are driving innovation and reaping profits such as Facebook and MySpace. In fact some of the biggest successes of the Web 1.0 era have been using Web 2.0 concepts since a long time. Take the examples of Amazon, Google and eBay. They leveraged on user inputs and offered open source web services long before these ideas were mentioned as a part of the Web 2.0 culture.
A study done by Neilsen Online revealed that the content generated by consumers is creating a major and all pervasive changes in consumer behavior. Everything on the Internet, from purchase decisions, communication styles and even relationships are being affected by consumer generated media. Furthermore, the report reveals that most users are initiated into content generating activities when they indulge in sharing and distributing content, for example sharing or sending photos and links.
Melanie Ingrey, the Marketing Director of Asia Pacific for Neilsen Online says, "We are seeing a revolution in the way in which consumers here in the Pacific and around the world are interacting, communicating, creating and nurturing personal and professional relationships, expressing and publishing their opinions and thoughts, creating and distributing content for and to one another, and entertaining themselves".
Financial Analysis
For the three months ended March 31, 2008, the Company earned revenues of $51,300 compared to $12,200 in the prior year period, reflecting a y-o-y growth of 320.5%. The increase in revenue can be attributed to higher subscription revenue due to an increase in customers to 3,460 subscribers as of March 31, 2008. This compares to 616 subscribers as of March 31, 2007. The increase in subscriptions was due to additional marketing activities performed in the quarter.
Total cost of revenue in the quarter was $11,000, which is 21.4% of the total revenue posted by the Company. Cost of subscription revenues during the quarter were primarily attributed to hosting and setup services incurred from website services provided to subscribers. Gross margin during the quarter was 78.6%.
Research and development expense was up 21% year-to-year at $58,700, while sales and marketing expense was up 45% at $153,500. G&A expenses in the quarter totaled $698,300, compared to $622,800 in the previous year quarter.
Interest expense in the quarter ended March 31, 2008 was $110,100, up from $1,500 recorded in the corresponding quarter in FY07.
In the three months ended March 31, 2008 the Company made a Net Loss of $981,200 compared to a Net Loss of $772,800 recorded in the quarter ended March 31, 2007.
Liquidity and Capital Resources
The Company had cash and cash equivalents of $122,000 as of March 31, 2007 as compared to $88,400 as of December 31, 2007.
The accumulated deficit of the Company increased from $3,494,200 as of December 31, 2007 to $4,475,400 as of March 31, 2007. The total assets of the Company were up about 33% at $354,300 as of March 31, 2008 from $266,500 as of December 31, 2007. The long-term liabilities were $299,100 as on March 31, 2008. Total Shareholders deficit increased from $196,100 as on December 31, 2007 to $288,800 as of March 31, 2008.
Since inception through May 14, 2008, DigitalPost Interactive has raised approximately $3.7 million through equity and debt financings and has no other significant source of cash. The Company expects that revenues from operations will continue to be insufficient to meet its working capital needs. This makes it mandatory for the company to raise additional capital through equity or debt financings in the near future. There is no guarantee that the Company will be able to raise the required capital.
Valuation Model
At the time of this report, DigitalPost Interactive’s stock closed at $0.11 (July 08, 2008). The 52-week low and high are $0.11 and $1.25 respectively. The financial year of the Company ends on 31st December.
We have developed a valuation model for DigitalPost Interactive based on the present value of the expected future cash flows (DCF model). The key assumptions for the DCF model are as follows:
- DigitalPost Interactive, Inc. is engaged in providing user-friendly interactive platforms that bring simplicity, versatility and security to online digital media sharing. The Company produces destination web sites that allow subscribers to securely share digital media, including photos, videos, calendars, message boards, and history.
- With the recent partnerships and deals, the Company is well poised to take advantage of the growing demand for Web 2.0 services. Its proprietary web administration services and technologies under development will enable it to grow its revenues and profits in the future.
- The Company’s decision to go for a revenue sharing model for its various tools and services will aid in partnering with the big media and technology companies as it is a win-win deal for both parties. This we believe will have a positive bearing on the Company’s future revenues. However, it will take a few quarters for the actual revenues to flow in.
- We project revenues of $3.8 million in 2008 and $19.0 million in 2009 based on our assumption of strong demand for the Company’s services, particularly the deal with Online Solutions and Kiddie Kandids. Thereafter, we expect revenues to grow by 60% to $30.4 million in 2010 and 35% to $41.0 million in 2011. We project revenues to grow by 20% to $49.2 million in 2012.
- We estimate Cost of Goods Sold (COGS) to be 37.5% of revenues or $1.4 million in 2008. COGS is estimated to be 34% of revenues or $6.5 million in 2009. It is estimated at 32% of revenues or $9.7 million in 2010. Thereafter, COGS is estimated to be 30% of revenues in the projected period.
- Research and Development expenses are estimated to be $0.50 million in 2008. It is estimated to grow by 50% to $0.75 million in 2009. Thereafter, it is projected to grow by 20% every year till 2012.
- Sales and Marketing expenses are estimated to be $1.5 million in 2008. It is estimated to grow by 200% to $4.5 million in 2009 and by 25% to $5.6 million in 2010. Thereafter, it is projected to grow by 10% every year until 2012.
- General and Administrative expenses are estimated to be $2.5 million in 2008. It is estimated to grow by 150% to $6.2 million in 2009 and by 20% to $7.5 million in 2010. Thereafter, it is projected to grow by 10% every year until 2012.
- Depreciation is estimated to be $95,250 in 2008, $336,675 in 2009, $910,673 in 2010, $1.6 million in 2011 and $2.2 million in 2012.
- Total Operating Expenses comprise of Cost of Goods Sold, Research and Development Sales and Marketing, General and Administrative, and Depreciation.
- Interest and Other Expense in 2007 was $700. DigitalPost Interactive had $0.2 million long-term debt as on December 31, 2007. For the purpose of this valuation we have estimated that the Company will raise debt of $3.0 million in 2008 and $2.0 million in 2009 to finance its working capital requirement and growth plans. We have taken interest rate of 10% and an interest outgo of $0.32 million in 2008, $0.52 million in 2009, $0.52 million in 2010, $0.32 million in 2011 and $0.06 million in 2012. We expect the Company to pay-off it debt completely by 2012 from the cash it generates from its operations.
- The Company is currently making losses and we expect the Company to start paying taxes only in 2011. Effective tax rate is estimated at 20% in 2011 and 30% in 2012 and thereafter.
- Capital Expenditure is estimated to be $0.3 million in 2008, $1.5 million in 2009 and $3.0 million in 2010. Thereafter, it is estimated to grow at the rate of 15% per year for the remaining two-year forecasted period.
- Free Cash Flow to the Firm is assumed to grow at the rate of 5% from 2013.
- We have assumed Cost of Capital to be 13.5% for DigitalPost Interactive based on the present industry structure and the risk reward profile of the Company.
Based on estimated 58.72 million share count the intrinsic value per share is estimated at $1.04. The intrinsic value justifies a significant appreciation from the current level of $0.11 over the medium term. With the share price significantly lower than the intrinsic value, we place a target of $0.52 as an intermediate target with a rating of Speculative Buy.
Risks
There are several risks associated with DigitalPost Interactive, Inc., which could hamper future growth. Some of the key risks associated with the Company have been outlined below:
Expected Operating Losses & Negative Cash Flow
DigitalPost Interactive, Inc. does not have sufficient sources of revenue to cover up operating costs. The Company is expected to continue to post operating losses and negative cash flow in the near future. The Company’s revenue, profitability and future growth depend on the anticipated market growth, its ability to execute the business plan, customer acceptance of its products and services, and the success or failure of its competitors.
Competition
DigitalPost Interactive, Inc. is operating in a competitive market and the competition is expected to increase in the future. The Company faces tough competition from My Family, Famster, Family Lobby, My Great Big Family, EasySite and Connected Family. There is also competition from companies such as Google, Microsoft and Yahoo. Each of these companies offers some of what DigitalPost Interactive offers.
Technological Obsolescence
DigitalPost Interactive, Inc. operates in a rapidly evolving internet technologies industry, where new technologies are constantly being discovered and developed. As a result the Company faces the risk of not keeping abreast about the latest developments and falling behind the competition. In addition, development and marketing of new technologies and products is a very expensive and time-consuming affair with success largely dependent on market acceptance.
Financial Risks
The Company will need to raise capital to finance its operations. If the Company fails to raise capital, or cannot raise capital at a favorable rate, or if the financing is delayed by unforeseen events, then the operations of the Company will suffer. To implement its plan successfully the Company will have to raise capital from time to time. Failure to secure the requisite financing could impede future growth prospects.
Conclusion
DigitalPost Interactive, Inc. is a rapidly growing new-age technology company that provides Web 2.0 and internet services. The Web 2.0 market is estimated at billions of dollars and growing. The Company with its proprietary technology, e-commerce, business development, strategic marketing, and financial management skills is poised to take advantage of the growing demand for Web 2.0 and internet services and to deliver a strong performance in the long-term, thus enhancing shareholder value.
Management
Michael Sawtell
Founder and Chief Executive Officer
Michael Sawtell is the founder of DigitalPost Interactive (DPI) and its flagship web property, TheFamilyPost.com – a ground-breaking Web 2.0 application. Under Michael’s guidance, DigitalPost Interactive has created one of the most advanced Web 2.0 platforms on the market today, and a suite of user-friendly web-management tools.
Before founding DigitalPost Interactive, Michael helped lead the turnaround of Local.com (formerly Interchange Corporation) - a leading local search engine that now attracts 10 million visitors a month. As President and COO, Michael helped turn around the company in 2000, taking it to seven straight profitable quarters and a $23M IPO. Prior to that, Michael worked for seven years at Northrop Grumman Corporation where he was tasked with ensuring the operational excellence of the B-2 Stealth Bomber system. He also held key positions with General Dynamics.
Steven H. Dong
Chief Financial Officer
Steven H. Dong serves as Chief Financial Officer for DigitalPost Interactive. Steven has over 18 years of experience in the financial management and consulting of publicly held companies, with his most recent executive position as Chief Financial Officer of Taitron Components, Inc., a top 50 leading semi-conductor company. During his four years as Taitron's CFO, Steven was instrumental in securing $20 million in financing and managing in excess of $41 million in assets.
As a consulting financial executive, Steven specialized in assisting publicly held companies in raising debt and equity financing, acquiring target merger companies and maintaining their corporate governance and compliance. Steven is also a Certified Public Accountant and received extensive financial accounting experience during his seven years at Price Waterhouse Coopers, LLP. Steven is a member in good standing with the American Institute of Certified Public Accountants and California State Board of Accountancy.
Robert Grant
Director of technology
Robert Grant leads DPI’s technology development, and is responsible for building advanced Web 2.0 functionality and value into the company’s platforms and tools. Robert brings more than 10 years of experience in web system design and development, online consumer product development, high volume transaction processing, and engineering management.
Prior to joining the company, Robert was V.P of Software Development at DigMedia where he managed several development groups for digital rights management. Earlier in his career, Robert was a technical account manager with Nellcor-Puritan Bennett and a webmaster at Toshiba Corporation. He has international consulting experience at various Internet startup companies in Scotland, England, Sweden, France and Germany.
Mike Maloney
Director of Media Relations
Mike Maloney drives DPI’s Public Relations and Media Relations efforts, implementing strategic communications plans that shape the company’s image and increase awareness among customers, media, and corporate stakeholders. Prior to joining DigitalPost Interactive, Mike consulted for a number of companies in the high-tech industry, generating millions of dollars worth of publicity for clients such as Cisco Systems, Macromedia Canada, Sierra Wireless, Corel, NetApp, NEC Technologies, and Hyperion Solutions.
About Equity Stock Analysis
EQUITY STOCK ANALYSIS is committed to the highest ethical standards and as such is not subject to external pressure that is sometimes experienced to issue biased research. This pressure is avoided by refusing to accept companies that cannot be recommended with objectivity, quality, and accuracy of research.
EQUITY STOCK ANALYSIS and its Certified Financial Analysts are independent, objective, and have a reasonable and adequate basis for our investment recommendations.
EQUITY STOCK ANALYSIS has established formal written policies supporting independent and objective analyst research.
EQUITY STOCK ANALYSIS has senior corporate officer publicly attest, at least annually, to adherence to the policy.
EQUITY STOCK ANALYSIS has senior corporate officer publicly attest, at least annually, to adherence to the policy.
EQUITY STOCK ANALYSIS has established rating systems that help investors assess the suitability of a security to their own unique circumstances and constraints.
EQUITY STOCK ANALYSIS "three-dimensional" rating system communicates risk and a time horizon in addition to the recommendation itself.
EQUITY STOCK ANALYSIS certified financial analyst compensation is aligned to the quality of research and the accuracy of analyst recommendations over time.
EQUITY STOCK ANALYSIS fully discloses all conflicts of interest of both the analyst and the firm.
EQUITY STOCK ANALYSIS does not allow analysts to buy or receive "pre-IPO" shares. Analysts may own shares of the companies they cover, as long as analysts are prevented from selling the stock when they are trading against their own recommendations.
EQUITY STOCK ANALYSIS also prevents employees from "front-running," or trading in advance of issuing research reports.
EQUITY STOCK ANALYSIS when discontinuing coverage issues a "final" research report and recommendation, explaining the reason for doing so, rather than quietly discontinuing coverage to avoid putting a negative rating on a stock.
EQUITY STOCK ANALYSIS and its research analysts do not participate in marketing activities, including "roadshows," for corporate clients issuing new shares of stock.
EQUITY STOCK ANALYSIS when relying on a report of a Certified Financial Analyst provides the research report to the public.
Code of Ethics
Equity Stock Analysis employs only Certified Financial Analysts that agree in writing to follow a Code of Ethics when conducting an analysis for Equity Stock Analysis. The designated Code of Ethics is stated below and was endorsed by the Certified Financial Analysts Institute Board of Governors in May of 2005. The new Code of Ethics for Certified Financial Analysts became effective 1 January 2006.
- Act with integrity, competence, diligence, respect, and in an ethical manner with the public, clients, prospective clients, employers, employees, colleagues in the investment profession, and other participants in the global capital markets.
- Place the integrity of the investment profession and the interests of clients above their own personal interests.
- Use reasonable care and exercise independent professional judgment when conducting investment analysis, making investment recommendations, taking investment actions, and engaging in other professional activities.
- Practice and encourage others to practice in a professional and ethical manner that will reflect credit on themselves and the profession.
- Promote the integrity of, and uphold the rules governing, capital markets.
- Maintain and improve their professional competence and strive to maintain and improve the competence of other investment professionals.
In addition to this Code of Ethics each and every Certified Financial Analysts for Equity Stock Analysis also agree in writing to uphold the highest industry standards as stated below.
Independence and Objectivity
Certified Financial Analysts employed by Equity Stock Analysis guarantee and agree to use reasonable care and judgment to achieve and maintain independence and objectivity in their professional activities.
Certified Financial Analysts employed by Equity Stock Analysis guarantee and agree to not offer, solicit, or accept any gift, benefit, compensation, or consideration that reasonably could be expected to compromise their own or another's independence and objectivity.
Misrepresentation
Certified Financial Analysts employed by Equity Stock Analysis guarantee and agree to not knowingly make any misrepresentations relating to investment analysis, recommendations, actions, or other professional activities.
Misconduct
Certified Financial Analysts employed by Equity Stock Analysis guarantee and agree to not engage in any professional conduct involving dishonesty, fraud, or deceit or commit any act that reflects adversely on their professional reputation, integrity, or competence.
Market Manipulation
Certified Financial Analysts employed by Equity Stock Analysis guarantee and agree to not engage in practices that distort prices or artificially inflate trading volume with the intent to mislead market participants.
Rating System
Rating Stocks
Equity Stock Analysis evaluates stocks as elements of a going enterprise or a business. We believe that a purchase of share of a business at a discount to the intrinsic value of the business will compound the value of the stock over a long period of time. We believe this investment is the best way to create wealth in the stock market.
Cash generated in the short term or within a year is worth more than cash generated several years down the road, and cash from a stable business is worth more than cash from a cyclical or uncertain business.
Risk Impacts Rating
Equity Stock Analysis has more confidence in our cash-flow forecasts for strong companies and they will receive a higher rating.
The future is inherently uncertain, and that uncertainty is greater for some companies than it is for others. If a stock's market price is significantly above our fair value estimate, it will receive a lower rating, no matter how wonderful we think the business is. Even the best company is a poor investment if an investor overpays for its shares.
Change of Rating
Equity Stock Analysis fair value estimates do not change often, but market prices do. A stock may gain or lose its rating status based exclusively on movement in the share price.
If Equity Stock Analysis believes a stock's fair value is $50, and the shares decline to $40 without a significant change in the value of the business, the rating will go up. The estimate of what the business is worth hasn't changed, but the shares are more attractive as an investment at $40 than they were at $50.
Timing of Ratings Calculations:
Equity Stock Analysis calculates ratings each night after the markets close, which is why the rating date on our reports will always be the previous business day.
The text of the reports is modified as market events warrant—usually about once or twice per quarter. All stocks covered are monitored every day, so our ratings are always current.
Long Term Value Basis of Ratings
Equity Stock Analysis focuses on the long-term value of businesses rather than short-term movements in stock prices. Stocks are rated in a three tier system:
- Attractive
- Neutral
- Monitor
Our rating is anchored on each certified financial analyst's estimate of a company's "fair value", which is what the analyst thinks the business is worth on a per-share basis.
Our certified financial analysts arrive at this value by forecasting how much excess cash or "free cash flow"—the firm will generate in the future, and then adjusting that total for both timing and risk.
Basis of Rating System
Competitive Advantage
A firm's ability to earn returns above its cost of capital in the future provides it with a competitive advantage. Competition tends to drive down excess profits, but companies can earn excess profits for an extended time by creating a competitive advantage —and these companies are likely to be superior investments.
Companies that are low-cost producers are favored because they create high switching costs for their customers, or have strong brands or long-lasting patents. All of these characteristics allow companies to protect their competitive position.
Discounted Cash Flow
This is a method for valuing companies that involves projecting the amount of cash a business will generate in the future, subtracting the amount of cash that the company will need to reinvest in its business, and using the result to calculate the worth of the firm. We use this technique to value nearly all of the companies we cover.
Discount Rate
We use this number to adjust our forecasted cash flows for the risk that those cash flows may not actually come to pass. For a very steady, stable company, we'll use a low discount rate, since we can have a lot of confidence that the firm will generate the amount of cash that we're forecasting. For a firm with a cyclical business and fierce competition, we'll use a much higher discount rate, since there's much uncertainty surrounding the firm's future.The discount rate may also be referred to as the "cost of capital."
Fair Value
This is the output of our discounted cash-flow valuation models, and is our per-share estimate of a company's economic worth. We adjust our fair values for any hidden liabilities or assets that a firm might have.
Our fair value estimate differs from a "target price" in two ways. One, it's an estimate of what the business is worth, whereas a target price is typically an estimate of what other investors will pay for the stock. Two, it's a long-term estimate, whereas target prices generally focus on the next six to 12 months.
Business Risk
Based on fundamental factors such as cyclicality, leverage, competitive strength, and profitability, we divide our coverage universe into risk categories.
Unlike some risk ratings, ours is not based on the volatility of the firm‘s shares, but rather the predictability and strength of the underlying business.
Margin of Safety
This is the discount to fair value we would require before recommending a stock. We require larger margins of safety for riskier stocks, and smaller margins of safety for low-risk stocks.
Consider Buying/Consider Selling
The consider buying price is the price at which a stock would be rated "Attractive" and thus the point at which we would consider the stock an extremely attractive purchase. Conversely, consider selling is the price at which a stock would have a "Monitor" rating, at which point we'd consider the stock overvalued, with low expected returns relative to its risks.
Margin of Safety
This is the discount to fair value we would require before recommending a stock. We require larger margins of safety for riskier stocks, and smaller margins of safety for low-risk stocks.
Consider Buying/Consider Selling
The consider buying price is the price at which a stock would be rated "Attractive" and thus the point at which we would consider the stock an extremely attractive purchase. Conversely, consider selling is the price at which a stock would have a "Monitor" rating, at which point we'd consider the stock overvalued, with low expected returns relative to its risks.
Compensation Disclosure
Pentony Enterprises LLC has been compensated 125,000 free trading shares from a non-controlling third party for profile coverage. Pentony Enterprises LLC is not a registered investment adviser or broker/dealer. Pentony Enterprises LLC makes no recommendation that the purchase of securities of companies profiled in this web site is suitable or advisable for any person or that an investment in such securities will be profitable. In general, given the nature of the companies profiled and the lack of an active trading market for their securities, investing in such securities is highly speculative and carries a high degree of risk. We currently hold fifty-five thousand of the compensated shares as of the date of publication. It is the policy of Pentony Enterprises LLC to sell all shares of this and any company featured. Anyone considering any company we feature in consideration for free trading shares should consider this.
Methodology
Equity Stock Analysis' complete coverage of a company provides our subscriber with the fundamentals of investing:
- Current - We notify our subscribers immediately of all news impacting our covered companies.
- Overview - We examine the big picture and analyze the company's fit in the economy;
- Interview - We go to the source. We interview the CEO and let our listeners decide based on first hand information.
- Analysis - We use a certified independent financial analyst to examine and report on the company's financials.
- Global - We cover emerging markets and provide insights into foreign economies. Executive interviews provide insightful analysis which includes the tangibles and intangibles of the local economic, political, sociocultural, and technological developments of emerging markets."
Equity Stock Analysis provides a vigilant radar by notifying the subscriber with the information they must have to regularly sharpen their instincts and keep their sails ready for any shift in wind direction and credible opportunities for investment.
Equity Stock Analysis employs a combination of fundamental and technical analysis in company evaluation.
- With fundamental analysis, an investor reviews the history of a company's financials, searching for evidence of consistently good management and the likelihood of ongoing growth.
- With technical analysis charts are evaluated which reflect the historical prices of individual stocks and composite prices of major indexes, seeking to recognize recurring patterns and inflection points that signal when to buy or sell.
Equity Stock Analysis has the experience necessary to predefine information needs, execute focused searches to acquire relevant information, and interpret and integrate financial statement information that interprets a firm's financial information for our subscriber.
Equity Stock Analysis employs extensive information-gathering strategies and is able to interpret and integrate financial statement information through a Certified Financial Analyst.
Equity Stock Analysis employs independent Certified Financial Analysts whose job it is to focus on a firm's financial statements, especially the income statement and cash flow statement.
A detailed discussion with management precedes this analysis by Equity Stock Analysis in order to:
- define the objective of the analysis
- define relevant information
- acquire relevant information from a credible source
- evaluate acquired information
- assimilate information with prior knowledge to form judgments
- make a decision based on judgments
This approach maximizes the subscriber's ability to make the best investment decision possible.
The discounted cash flow model used to derive the price target for Tootie Pie Company was based upon guidance provided by company management with regard to sales and revenue forecasts.
- End -
Copyright © 2008 by Pentony Enterprises LLC. The report and all of its contents are the property of Pentony Enterprises LLC. No part of this publication may be reproduced in any form or by any means without the prior written permission of Pentony Enterprises, LLC. For any permissions, please contact our CEO, John Pentony by email at: john@pentony.com.
10604 Robincreek Lane
Frisco, Texas, 75035
(469) 252-3030.
|
