Free
Message: Reverse engineering to calculate breakeven

Based on Sinkman's hypothetical 20 million settlement, several factors would come into play.

1) Would edig IFE sales be great enough to have reached the breakeven point?

2) Is the backlog sufficient to project future quarter's profitability? 

3) Would DM have started multiple lawsuits, with the first being successful as a 20 million dollar settlement?

4) Are the lawsuits major players in their respective industry?

If the above questions generate positive answers, then the minimum share price based on a PE of 15 would equal $.60, using an eps of $.04, computed from the 20 million income.

However higher multiples are probable as an emotional aspect and anticipation of future settlements would influence the price substantially. Quite possible we may see a multiple of two to three on top of the normal 15 PE and settle in a range of $1.20 to $1.80.

The negative side to this which may be categorized as a sell off would result from long term investors taking major profits, and a fluctuation in the price in the early stages would happen until the reaction to the initial settlement becomes stable.

Projecting long term, think about multiple settlements totaling 200 million net income. At $.80 eps, even a low PE of 15 would take the price to $12.00 as long as continuing lawsuits were on the horizon. In this instance we may see a price in the range of $15.00 to $30.00 or even higher.

Wow, I'm dreaming, but who knows. All it will take is 5 to 20 major settlements and we could have a blowout.

I haven't exercised my speculative optimism for quite a while. 

Share
New Message
Please login to post a reply