Tue, Mar 11, 2014, 6:35 PM EDT - U.S. Markets closed

# NetSol Technologies, Inc. Message Board

• working_on_1st_million working_on_1st_million Mar 10, 2013 7:57 PM Flag

## More fair value calculations based on Op Cash flows

A few weeks ago I put out a message calculating the fair value of NTWK based on operational cash flow. I have seen that post reposted several times by Netsollong so I am assuming people enjoyed it. I try to add value to these boards, but I am never quite sure if what I am posting is considered to be of value or spam. But I think fair value calculations are of value, so here are some more thoughts.

First, I don’t feel earnings are important as far as the absolute number is concerned. What is important is that earnings are increasing and the company is beating estimates. NTWK passes both tests. I calculate fair value thru operational cash flow. Fidelity states stocks are now trading at a median of just under 8X op cash flow. Stocks with long term debt levels under 1 year of OCF, and have accelerating OCF, trade at a higher multiple and stocks with 3+ years of long term debt to OCF usually trade lower. NTWK has interest expense of 2.75% of it’s OCF. Clearly debt is not a problem with this stock. I’d say it’s worth 10X OCF, but I’ll use 8 and 10 times OCF to calculate fair value.

Here are the numbers.
EPS OCF
Q3 0.03 0.16
Q4 0.25 0.35
Q1 0.12 0.36
Q2 0.28 0.81
Totals for last 4 quarters (trailing numbers)
EPS = \$0.68
OCF = \$1.68
Fair value = [[[[[ \$13.44 to \$16.80 ]]]]] (As of Dec 31, 2012)

Estimates for next 2 quarters
EPS OCF
Q3 0.21 0.60
Q4 0.35 1.00

After Q3 (March 31)
EPS = 0.86
OCF = 2.12
Fair Value = [[[[ \$17 - \$21 ]]]]

After Q4 (June 30)
EPS = 0.95
OCF = 2.77
Fair Value = [[[[ \$22 - \$27 ]]]]

EPS estimates are 21% higher for the 4 quarters next year, making \$3.50 - \$4.00 of OCF very likely for the year ending June 30, 2014. A fair value of \$35 - \$40 is pretty easy to see (in 14 months). And don't forget the stock market looks 2 quarters ahead.

I welcome feedback, but please no personal attacks.

SortNewest  |  Oldest  |  Most Replied Expand all replies
4.505-0.045(-0.99%)Mar 11 3:59 PMEDT