RE: Mkt cap vs results7 May 2022 23:00
bunsen,
The company has fixed operating costs of a few million a year, another million in development costs and a couple of millions of launch costs per product. Production is outsourced, as is distribution. Gross profit rates are consistently around 70%. The expected increases in sales will flow straight through to net profits.
The products are a novel class of plant additives / stimulants with patent protection. They take time to get regulatory approval but should generate over $10m in turnover for each product with potential for much higher sales if / when they are more widely adopted.
The main product currently being sold is Harpin aß; new products are being added - PHC 279 has been launched as a soybean treatment in Brazil and regulatory approval is expected for the US market this year.
Sales of Harpin and PHC 279 should take the company to generating sufficient cash and profit to fund a new product launch each year. With a fair wind, profit should increase from breakeven to $10m by 2024/25 with the potential to increase by another $10m each year thereafter. That would generate in excess of the current m/cap in free cash flow every year before the end of the decade.
Under those circumstances, the share price could 10-bag, not double, but the increase would be slow with spikes and falls along the way. Progress is slow in this sector as farmers are notorious for not wanting to risk new treatments, and they only get to make changes on seed treatments / plant treatments on each sowing.
There is an Investor Meet presentation next week; I would recommend watching it if you are interested in the future of this company.
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