Can someone explain Velt -0.23 PEG in laymens terms?
I know a low peg (under 1) generally means the stock is undervalued. for example if Velti had a Peg ratio of 0.25 and the stock was trading at $2 then under fairly valued circumstances the stock would really be worth $80. so how do you make a comparison to a negative Peg ratio that velti exhibits (-0.23) and how would you make a comparison for fairly valued?
A negative PEG is meaningless because there is no earnings, only a loss. The PEG should actually read N/A right now. But if they do indeed make $40M in FCF and perhaps $0.25/share with 100M OS in 2014 with 30% growth thereafter, then the PEG will come into play. So, fair value (PEG = 1) should be 30(%) x 0.25 (Earnings) = $7.50. But the short covering and/or momentum could easily take it past $7.50 if the street notices a turnaround. My personal targets are $8 for 2014, $16 for 2015 and a $20 sale to a bigger company in 2016, if things unfold to Ross's plan (IMO). He then moves on to turn around another high growth company in the IT space.
I'd just observe that microcaps with no earnings often trade like a leaf blowing in the wind. This one is down close to the ground for reasons we all know. If this quarter and next is what management predicts, we'll blow back skyward, potentially fast. This can become an $8 stock again, if a PE (any) even gets slightly realistic. Look at a stock like Z year to date - that could easily be VELT in a couple quarters, and Z has a huge PE, with almost 40% of the float short. Mobile advert will have its time.