Does anyone know if Dorkheimer shares his valuation models? Based upon what he wrote, it would be easy to test his assumptions and show where different estimates/assumptions would result in different enterprise value. This is what he wrote:
"“Under these assumptions we calculate between $775M and $1.3B in discounted cumulative cash flows. These figures compare to the firm’s current enterprise value of $1.23B – meaning a somewhat generous base case computes a fair value 37% below current market value and a very generous bull case which is only 5% above the current market value.”"
What are his assumptions for penetration of display, TV, and lighting for the next 5 years? What are his assumptions for volume, margin and fade rate for host, emitter and encapsulation? What discount rate is he using? Does his $775M -$1.3B include the $250M of cash the company is sitting on?
"“Under these assumptions we calculate between $775M and $1.3B in discounted cumulative cash flows. "
I think the real question is when they hit that range in their top line in one year, not in discounted cumulative cash flows. With UDC's very high margins, a $B year could approach a $750M bottom line. Furthermore, Jed's lack of confidence in the longevity of patents and licensing would dramatically curtail the number of years in his model. Finally, at today's 3-5 yr rates, his period outlook would have to be very conservative. On the other hand, if he truly believes OLED is junk, maybe he is applying junk rate discounts. Bottom line, his prejudice against the company and probable alliance with certain NASD criminals, must severely color his models period and rate assumptions and coeficients.
I guess that Dorkheimer's estimate of cash flow comes from the same place as his target price $19. Yes, you get it right, it's the same place again. He does not need sophistcated state-of-art model for this - he just pulls it off, and here we go...