Just some valuation considerations to think about.
Some have construed the fundamental valuation arguments to be so negative that I wanted to simply address the real numbers in a simple manner without spin, hype or bias. Some of the figures have been rounded to the nearest whole figure to provide a clearer picture.
O/S = 1 Billion shares
P/E = ??
EPS = ??
PPS = P/E * EPS
The P/E multiple along with the EPS is a question mark because while the next quarters EPS is an unknown, the P/E is an ever changing value because the market for RFMK shares is so thin, individual buys and sells of a very small number of shares as compared to the total shares outstanding have dictated the daily price fluctuations which are therefore next to meaningless. All we can really assume is a range of possible P/E multiples placed on the stock based upon the multiples attributed to other similar stocks for companies with a similar growth path as RFMK. Lets assume that RFMK can grow annual earnings by double; effectively doubling their PROFITS each year, then the multiple could be as high as 100. If we assume they could grow earnings by say 50% then the P/E could be up to 50. I think we can assume with such a business plan as it is for RFMK, with their unique product, web and dispensary sales, connections and marketing strategy, the sales growth I should think would be at least 15% and probably higher. In most estimates of valuations it is usually wise to assume the middle of the road scenarios, so for RFMK we can assume 50% earnings growth per year, so we can use a P/E multiple of 50.
EPS is entirely unkown because once large sales are happening, it is difficult to know how good RFMKs margins will be, the overall costs incurred with bulk sales and logistics, as well as how large the initial market will be; how many customers will be buying the product in the first quarter. I think that we can assume margins should be quite good, because as was hinted by the CEO, the company can buy the units for $30, then if we assume an additional $20 for costs with the dispensaries cut included, then we can assume with a sales price of $100 that the company very simply makes $50 per unit in profits, which is a 50% margin, which is rather high. There are also P.I.R.D. repeat sales to factor in. However for simplicity I usually take the perspective that it is easier to just use such profits from that income stream to cover unexpected expenses over time, which leads to even more conservative estimates, which is always wise.
I think that if we assume revenues from consulting, PIRD sales, Bionic sales and all the other income streams besides the direct sales of the CannaCig are used to cover operating costs and expenditures then we can easily assume that the total profits should be $50 multiplied by the number of units which can be sold per quarter.
Now the calculations become much more simple because now the only question mark is how many CannaCigs do you think RFMK can sell each quarter? I think that if we assume we have about 10 dispensaries including OHM and Tabu and the webstore selling altogether as few as 100 units per day (that would be only about ten units per outlet per day) then in three months, 90 days, RFMK could make (100 * 90 * $50) = $450,000.
If we round that profit up to say $500k per quarter then annual profits would be four times that or $2M. Now, assuming these values and substituting we have,
EPS = $2M/1B = $0.002/share
P/E = 50
PPS = P/E * EPS = 50 * $0.002 = $0.10
Also if instead the year over year growth is $2M, if the collective selling power is 200 units per outlet per day, instead of only 100 units then P/E could be 100. In that case the PPS could soar to $0.20 !!!! Do your own DD, do your own fundamental valuation calculations and assumptions but this post is just me sharing my own personal perspectives and assumptions on the fundamentals and could be very very wrong. But I think that these assumptions are not completely out of left field and are actually quite conservative. I think the key metric to keep a close eye on is how many units can be sold once all outlets are selling with no inventory restrictions and full marketing campaign is in full swing and after at least one reported revenue quarter is in the books, THEN we will get an idea of the true demand out there and I think if we are pleasantly surprised with the demand, the stock could sky rocket with big investment coming in!
GLTA!
$RFMK!
