I've noticed that most people who have been evaluating this stock are using an outdated share count prior to the impact of the secondary offering and/or the convertable debt. Those old share counts of 24 million or 35 million are no longer valid. And forget Yahoo stats, they are still showing only 17 million outstanding. The recent investor presentation slides show the current fully diluted sharecount as 43.4 million shares (slide 21). At the current stock price of $15.89, that's a market cap of $690 million. Is it really worth that valuation?
Let's assume they do meet their lofty goal of acheiving $500 million revenue run rate by the end of the year. That's a P/S ratio of 1.38, on operations with negative cash flow. The valuation seems to be getting pretty rich just based on industry comps. I wasn't expecting Jacobs to dilute shareholders this fast. Earlier this year, I was saying $17.50 was fair value for the stock. But now after two rounds of dilution, it's hard for me to even place a $16.00 price on this stock. Jacobs could use all the remaining earmarked cash to buy $500 million more revenue, and that would bring down the P/S ratio to reasonable levels. But then it's back to square one and further dilution to raise additional capital.
Common Stock Equivalent Capitalization (as of 9/30/12)
Common Shares: 17.9 million
Preferred Shares: 10.7 million
Warrants (Strike Price $7 per share): 10.7 million (5.5 million dilutive) (1)
Convertible senior notes: 8.7 million shares (2)
Stock options and RSUs: 0.6 million shares dilutive (3)
Fully Diluted Shares Outstanding: 43.4 million shares
(1) Dilutive effect of warrants calculated using treasury method (avg. market close price of $14.43 for Q3 2012); total warrant proceeds of $75 million
(2) Assumes conversion in full of $143.75 million in aggregate principal amount of convertible senior notes issued in September and October 2012
(3) Dilutive effect of Q3 2012 weighted average outstanding RSUs and stock options calculated using treasury method (avg. market close price of $14.43 for Q3 2012
Using the P/S method myself this post does give me pause. I'm using CHRW as the primary stock to base a valuation off of and we therefore are in a zone where there should be some downward momentum. It's a reasonable possibility.
What I'm wondering ultimately is how many more firms do they need to buy relative to just scaling up the existing operations. Another 250 people at the NC location with a 50k salary would only require 12.5 million/year. Depending on the revenue generated by each worker that could be either incremental to earnings or a boon. If they're averaging 1mil/year then id guess that would add .25 EPS fully diluted, if they average 5mil/year it'd be 1.25 at current fully diluted EPS.
It happened again yesterday. Analyst Brian Nichols wrote an article in Motley Fool using mistaken data:
"...After the company completes its next acquisition, XPO could have revenue of more than $650 million with a market cap of $300 million."
No, the market cap is currently much higher than $300 million. Please refer to my first post in this thread to get a proper understanding of the capital structure of the company. You can no longer use 17 million shares as the fully diluted sharecount when calculating the market cap. The Yahoo statistics page is outdated. You have to use Jacob's own sharecount calculation that he was kind enough to display in the recent investor conference. Those numbers are fully detailed at the bottom of my first post in this thread.