In my opinion, fair value for this company is at most $1.19 per share. Here's my logic:
Latest reported quarterly net income: $135,313. Not normally how you do this, but I took $135,313 * 4 = $541,252 for annual net income. Calculating for a P/E of 25, I get $1.19 per share. I do not look at expected future growth or anything else. Just what a P/E of 25 would look like using very crude numbers. Thus, current price of $4/sh seems a bit much for me at this point.
Seems like lots of growth in Net Income is expected at the current price level.
Thanks for the feedback. Looks like the restaurant sale you mentioned shows a negative (not positive) to net income, so your point does not make sense. Net proceeds from issuance of notes does not appear in Net Income either, that is debt and would appear on the balance sheet. So again, that does not matter to me in figuring Net Income. Same goes for the issuance of preferred stock. I will stick to my estimate of $541,252 for annual net income.
I think you and I are just looking at things differently, but thanks for the input.
Assuming neutral growth, I am thinking $1.19 is fair value. If anyone has a reasonable future growth estimate, just use that to figure what you think the higher stock price might be. Currently the market (based on the approx $4 share price) thinks that future growth is more than double their current earnings rate, which I think is a bit optimistic. Maybe somewhere in between, or even negative if they start losing sales. Thus, assuming flat growth works for me.
Again, all just my opinion. I am not a professional in this field.