AEYE valuation (sales based)

With AEYE currently trading at 1.02, it has a market cap of $56M. That may seem high for a company with trailing 12 month revenue of a little over $5M and would give them a price to sales ratio of 11. This puts them on par of some of the bigger, high growth tech stocks. That’s pretty cheap if you consider they grew sales at 1500%! Annualizing the recent June quarter of $3M of sales, you have $12M assuming they don’t grow from here. That’s a price to sales ratio of 4.7, which is now looking pretty cheap. The good thing too is that the business is very scalable with recurring revenue, so their profit margins should grow as their sales grow. Going from $1M in sales for the March quarter to $3M for the June quarter is a game changer. Obviously this % growth will slow in the near future, but if you only assume 20% grow per quarter and look forward over the next 4 quarters, you would have annual sales of $19M, which gives you a forward price to sales ratio of 3. Given their high growth and increasing profitability, that would be downright cheap. With all that said, this is still a penny stock that only a few quarters ago was making less than a $1M in annualized sales, so as many people have said, don’t allocate too much of your portfolio in AEYE.

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I see a lot of enthusiasm for this stock on this board. I understand the enthusiasm when you look at things on a percentage basis, but how many customers today have? How many deals have they closed? When you have almost no revenue closing the single deal can cause an enormous increase in percent of sales. But we don’t have indicators showing that they can continue to perform. Tuesday have a professional salesforce? In how many states? Do they understand the long lead times involved in selling to the government? They clearly have some political muscle, at least in Arizona. But that does not translate into sales in other states.

There’s an expression and investing - trees don’t grow to the Sky. They have a high percent of revenue growth today, but small companies revenue can be extremely lumpy. Be very careful about extrapolating that revenue growth into the future. One deal or two deals can completely change the numbers, in a percentage basis it’s huge but we are still talking about a very small company.

I hope for all of you bought in, and are enthusiastic about the stock that it goes well. I will certainly follow its progress, but many professionals will not invest in companies that are trading below five dollars a share; they miss out on some opportunities to be sure. But there is also reason that professionals do not invest in companies below five dollars a share. I will watch and look for signs that this company has a future, but I want to see it not hope for it.

Some people on this thread are long-term investors and can decide to take the risks on these kinds of companies. But I felt it important to tell the newer investors that you need to be careful and think about what is the appropriate risk for you.

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Sorry about the translation errors I dictated that post…

With all that said, this is still a penny stock that only a few quarters ago was making less than a $1M in annualized sales, so as many people have said, don’t allocate too much of your portfolio in AEYE.

Hi Wouter,

I just finished a small analysis of my portfolios grouped by cap size.

The microcap stocks (<$250M) are ALL losers and account for -6.8% of the profit.
The small cap stocks ($250M to $1B) yield 31.6% of the profit.
The medium cap stocks ($1B to $10B) yield 37.1% of the profit.
The large cap stocks ($10B to $50B) yield 15.2% of the profit.
The mega cap stocks ($50B +) yield 22.8% of the profit.

Takeaways:
Funny that I had just read an article that stated historically the mid cap stocks yield more than any other cap size.

I would expect a few of my micros to be making money however all 7 of them (2.6% of my portfolio) are below cost. Maybe it’s a bit early (AEYE is .03 cents away from breaking even and the closest). The other 6 are all double digits down.

I’m not a very good picker of micro stocks.
FYI
Mykie

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