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NetSol Technologies, Inc. Message Board

  • jehaty19 jehaty19 Feb 25, 2013 1:53 PM Flag

    What's driving this suddenly?

    I am long and happy. STILL

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    • This was a nice explanation from another poster.
      First look at earnings
      Q1 = 0.12 actual (0.10 est.)
      Q2 = 0.28 actual (0.11 est)
      Q3 = 0.21 est.
      Q4 = 0.35 est.

      Q1 & Q2 were solid beats. History predicts when a company beats eps estimates over the previous two quarters it has an 80% chance of beating over the next two. That is from an old time investor named Marty Zweig.

      But for me Operational cash flow is more important than earnings. So let’s look at it.
      Q1 = $2.9 million (0.39/share)
      Q2 = $6.5 million (0.85/share)
      Six months total = $9,428,545 / $1.24/share
      Q3 = $6.5 million (guessing same as Q2?) I feel it will be higher
      Q4 = $7.1 million (adding 7 cents to eps from Q2– all else remains the same)

      Total for year ending 6/30/2013 = $23 million
      Average for all stocks today = 7.78x annual op cash flow

      Fair Price for NTWK based on op cash flow = $22/share (based on 8 million shares)

      EPS estimates for 2014 are 35% higher. Op cash flow should increase by a minimum of that 35%, but with economies of scale, it “should” be higher. But using a 35% increase in op cash flow we get $31 million in 2014 (8.25 fully diluted shares) = $29/share.

      Lastly I like to see how much of cash flow that debt is taking. Interest expense in Q2 was $179,932 or roughly 2.75% of op cash flow. An excellent ratio. Companies like this with low debt usually carry a higher op cash flow multiple than 7.78. Typically it should be closer to 9.

      Don’t get me wrong, this stock has some negatives. I don’t care for the CFO. It appears he isn’t hedging against currency fluctuations. They got lucky this quarter with a gain. Also, they booked $484,487 ($0.06/share) of income this quarter that should have been booked next quarter or at most, half this quarter. Either way that doesn’t matter. Lastly, they could do a little better job with the accounts receivable. I feel it’s a little high as a percentage of sales.

      Sentiment: Strong Buy

    • #$%$ happened to the rest of my post? Anyway - seems to strong a climb based solely on valuation and earnings. I'm thinking monster contract or a buyout are in the works


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