Deal or No Deal?

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Deal or No Deal?

posted on Aug 05, 2008 07:58PM

It was posted earlier today Crossflo had revenues of $20M in the latest fiscal year. Assuming that is an accurate figure, one can theorize the following valuation:

$20M X .15 (Net Profit thru G&A Before Taxes) = $3M*

$3M X .6 (Fed & State Taxes - 40%) = $1.8M Net Income

$10M / $1.8 = 5.5 times earnings.

* I have over 20 years experience in financial management in manufacturing - Aerospace overseeing hundreds of individual contracts and their associated profit margins quarter in quarter out. The .15 figure is IMO, assuming the operation is running smoothly. This figure could be lower to be conservative based on Crossflo being a very young company and the technology is pretty sophisticated neccesitating some high-end engineering work. Draw your own conclusions.

Typical buyouts range from 4-6 times earnings. I woudn't say we got a "steal" by any means. Now, if sales are expected to ramp up quickly, the merger looks much more appealing.