Worth a read…
I particularly liked one of the comments below the article:
It’s interesting to me that the stock price is getting so low now that I’d argue the market is valuing AFOP almost as if it didn’t even have a customer that accounts for 40% of revenues. At first, it certainly sounds ridiculous. But, let’s look at P/E and Enterprise value to earnings ratios of AFOP assuming that they don’t have that customer at all! Let’s assume that AFOP’s 4th qtr 2013 P&L performance was the same as 4th qtr 2012. Instead of the tax benefit in 2012, let’s assume no taxes, for ease of calculation. So, earnings were $1,885K, and dividing by current fully diluted shares of 19,198K shares results in 4th qtr eps of $0.10 / share. Annualize that for a very conservative 2014 eps number of $0.40. Then, the forward p/e ratio is 28.9x (= $11.55 / $0.40). The enterprise value / 2014 eps number is then 21.4x (= $11.55 stock price - $3 cash per share, divided by $0.40). An EV/eps ratio of 21.4 is very reasonable for a company that has great prospects of growing 20%+ per year over the next few years, if you believe in the data center/data comm bandwidth explosion.
On the other hand, under the much more likely scenario that the current major customer (whether it’s Google, IBM, Amazon, Apple, etc.) doesn’t go away and continues to order product in 2014, 2015, and beyond, and if AFOP is successful in adding another major customer (e.g. one of the other data center companies), AFOP currently looks to be tremendously undervalued at today’s multiples: the forward p/e ratio is 9.7x (= $11.55 stock price / $1.19 analyst-projected 2014 earnings) and EV/earnings ratio of 7.2x (= [$11.55 - $3 cash per share] / $1.19).
http://seekingalpha.com/article/2023941-alliance-fiber-optic…