BOTB
Posted: October 15th, 2021, 10:15 pm
I'm looking at Best of the Best (BOTB) and trying to figure out if it's undervalued or overvalued. Best of the Best is a basically a sort of raffle for luxury cars. It used to concentrate on airports and shopping centres but over the last few years it has moved online.
Here's the last few years (amounts in 000's)
So, until last year revenue had been increasing about 15% a year on average and profit margins were about about 10% on average but profits were improving. That last year is a massive jump obviously but that's lockdown enhanced and they've issued a profit warning for next year suggesting that's not going to continue.
The market cap hit a high of around 350M around the release of the results but it's back down to around 60M now.
Let's suppose that instead of the covid jump the the revenues had increased by 15% to 23188 and assuming that Peter Lynch is right in saying that companies that grow at 15% are worth roughly 15 times EPS then the company would be worth.
If you throw in around 6M in cash it looks like 60M might be about par.
However, the profit warning doesn't actually seem to be suggesting that profits are going to be returning to pre-pandemic levels. They've suggested a 57% reduction which means that earnings would be around 5M which if we use the 15 multiplier would suggest about about 75M is a better estimate. Also, as the reduction in expected profits is due to the higher cost of getting customers through online advertising is something which they feel could normalise there's a resonable chance that profits could be higher than 5M.
Another good thing about BOTB is the high level of insider ownership. It does seem that the main shareholder/founder has just stepped down from the board though so I'll need to do a bit more digging on that.
Any thoughts or comments are very welcome.
Here's the last few years (amounts in 000's)
So, until last year revenue had been increasing about 15% a year on average and profit margins were about about 10% on average but profits were improving. That last year is a massive jump obviously but that's lockdown enhanced and they've issued a profit warning for next year suggesting that's not going to continue.
The market cap hit a high of around 350M around the release of the results but it's back down to around 60M now.
Let's suppose that instead of the covid jump the the revenues had increased by 15% to 23188 and assuming that Peter Lynch is right in saying that companies that grow at 15% are worth roughly 15 times EPS then the company would be worth.
If you throw in around 6M in cash it looks like 60M might be about par.
However, the profit warning doesn't actually seem to be suggesting that profits are going to be returning to pre-pandemic levels. They've suggested a 57% reduction which means that earnings would be around 5M which if we use the 15 multiplier would suggest about about 75M is a better estimate. Also, as the reduction in expected profits is due to the higher cost of getting customers through online advertising is something which they feel could normalise there's a resonable chance that profits could be higher than 5M.
Another good thing about BOTB is the high level of insider ownership. It does seem that the main shareholder/founder has just stepped down from the board though so I'll need to do a bit more digging on that.
Any thoughts or comments are very welcome.