Listen to the call, ERII mgmt told us they are upgrading their opinion of the global desal market to BULLISH. 2013 revenue was 43MM...2012 revenue was 42MM...were those BULLISH years? Let's say they were and that BULLISH means 43MM in annual revenue.
So 43MM in revenue at 65% margin. 28MM gross income.
We know from the call that ongoing opex is going to be $7MM to $7.5MM per qtr and that one-time charges are over. So 2016 opex should be $30MM to $28MM.
We know that ERII should book $50MM in milestone payments in 2016. That's at 100% margin. So 50MM to 48MM bottom line dollars. There are a little less than 55MM shares outstanding. Meaning 90 to 87 cents per share.
If the median industry multiple is 15x (it's a couple points higher than that) that means a $13+ stock price.
Good point. Remember from 2q the $4 to $5 per share valuation model used $43MM in annual revenues.
Why $43MM? Why not just round it off to $40MM?
1h15 revenue was 16MM. If annual revenue is supposed to hit $43MM that works out to 13.5MM in revenue for each of 3q and 4q. I don't know if that is properly classified as blockbuster revenue, but it's very, very good by any metric.
Also, consider the following points that were mentioned on the 2q conference call:
1.) Large non-recurring expenses are largely over.
2.) Without non-recurring expenses 2q costs were 6.4MM. If that's the on-going number and revenue comes in at 13.5MM, that's a very, very good quarter.
And, of course, throw in 75MM of 100% marge revenue for 4q!
I'm betting there won't be another low entry point in that time frame. Vorteq is just one opportunity that ERII have monetized. There are other, bigger opportunities in chemical and natural gas markets...and other markets as well. Something from one of those markets will come off between now and start of royalties.
Of course, it all depends on what you think 'low' is. If you are thinking $6.35 is low, well done! If you're waiting for sub $3.00 again, good luck!