RE: At what point will our P/E ratio rise?3 Aug 2020 22:12
Just going to paste my post from a few days ago in case of interest to anyone that missed it!
“ There is no doubt that Covid testing will be a max 2 years (from February 2020) windfall and sales will then substantially reduce.
All from RNS info:
Contracted sales revenue (including received cash revenue and contracted future revenue) to 1 June - £120m
We know that June was another month of growth with circa £20m additional sales
EBITDA margin - 60%
So, as of end of June, NYCT has generated c.£85m contracted cash profit, over what really is essentially a 4 month period.
If this is merely repeated from 1 July to 1 November, we are looking at £170m cash profit.
The current market cap - 215m, so is likely currently 80% underpinned by annualised cash profit.
Assuming sales growth continues on its current monthly increasing rate, one can objectively, and quite reasonably, say that the entire market cap is underpinned by its annualised cash profits.
Factoring in slightly reduced margins from competition (of which i'm sceptical because of the huge demand and the fact that scaling up production is outsourced and not too capital intensive) and on a conservative basis this company is very undervalued.
If we see any sort of material increase in sales from the last 4 month period (highly likely) and confirmation that testing will be around for 2021 as well as 2020, then in my opinion, the valuation should at least double to £430m.
Even this sort of valuation doesn't assign any value to the non-covid part of the business and the likely change in attitudes towards testing generally in the medical world. Neither does it factor in that the company will be in a wonderful position to buy assets and/or companies and diversify the business with a view to creating long term value for shareholders.
All my own opinion and would like to hear others' views.”
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