"The price-to-sales ratio can vary substantially across industries; therefore, it's useful mainly when comparing similar companies. Because it doesn't take any expenses or debt into account, the ratio is somewhat limited in the story it tells. "
"As powerful a valuation metric as the P/S ratio may be, it would be a mistake for investors to put all their stock price valuation eggs in one basket. However, the P/S ratio does provide another perspective that complements the other valuation indicators - particularly the P/E ratio - and is a worthwhile addition to an investor's stock analysis toolbox."
If a company has no meaningful P/E ratio, why should we hang our hats on the PSR? These ratios were NEVER intended to be used as stand-alone indicators of value. Nuff said!
For now, the only way to valuate a company like PLSB is to analyze what people are willing to pay for it -- plain and simple. But penny stock prices can be all over the map due to momentum players and pumpers; you have to find a period of price stability; a period where some kind of trading range is established. In this case we saw that range pretty much throughout 2012 -- 45-cents to 60-cents.
But that's 45 to 60-cents based on 2012 sales of 227K cases of Cabana; for 2013, we're looking at 366K cases (296K already sold through Q3 + 70K est. for Q4). For now, seems reasonable that the Q4 off-season sales will be about the same as Q1, which was 77K; that turns out to be a 60% YOY increase in sales.
Even if the trading range reflected just half of that increase (30%), we should be trading in the $0.58 - $0.78 range next year, or until new sales data comes in. If we fail to maintain these sales, obviously the price is going to drop more. I think realistic sales growth (not those over-optimistic forecasts) will be on track through out 2014. Remember: mgmt. IS on track with their listing count.
Forget Cabana! That was their start-up product. YOY sales doing well despite mgmts. gaff at missing forecasts. Cabana YOY sales will increase in the coming Q's but revenues from one seasonal product line are just enough to keep the doors open & pay the bills for now . The REAL kicker is the roll-out of the Pulse Functional Drinks back in May -- this is their flagship product. Need to keep an eye on growing sales & acceptance.
As total revenues pick up, more $$ will go into advertising; mgmt. stated in the 10-Q that advertising budgets are allocated in proportion to sales -- the more you sell, the more you can afford to advertise. I think we're at least 18 - 24 months away from any substantive national advertising effort. Just look at what Coke & Pepsi spend per year on advertising relative to revenues, it gets expensive. I suspect Pulse will deploy their advertising $$ on a regional / urban basis where the most sales can be generated.