Monday, 9 April 2012

Finding Beat Up and Undervalued TSX Stocks - #1

As the S&P reaches levels it hasn't seen in four years and a stock like AAPL is worth over half a trillion dollars, one can't help but notice that the market appears to be overheated. The truth is that it is not. One of the clearest signs of an overbought market ready for a pullback or outright fall is when every single piece of garbage that trades on the stock market is overbought. Right now there are plenty of bargains to be had. This is the right time to get into these bargains as a long bull run in the market, particularly on the large caps in the US, is a prelude to the underperforming small caps to catch up.

With this in mind I have decided to start a series of stock picks with the same themes - poor recent share price performance and fundamentals that suggest they should be priced much higher. Right now there is no stock more beat up on the TSX than Yellow Media Inc. In 14 months the stock has managed to go from $6 to 7.5 cents thanks to the supposed threat of common shareholders being wiped out as the company's debts loom. Things is, the consensus is that Yellow Media will not get into liquidity trouble until their 2014 obligations come due. Referring to Page 12 of the company's Q4 2011 Supplemental Disclosure, we see that the consensus analyst estimate is $0.51 in EPS for 2012 and $0.48 in EPS for 2013. The current P/E is 0.14.

Never have I seen in my life a company so thrown away by the market where everyone assumes that bankruptcy is a foregone conclusion when the first sign of possible default is over 20 months away. Eastman Kodak is in bankruptcy court right now and is losing about $100M a month in an industry that is in greater peril than YLO's thanks to the advent of Smartphones and emergence of big box retailers. Yet their market cap is STILL $79M. YLO's market cap is half of that and they haven't defaulted, and have a consensus net income of over $260M in 2012! It simply boggles my mind how YLO is given absolutely NO benefit of the doubt. Not one penny of liquidity or trading premium on the stock. With the market the way it is, our next big leg up on the TSX could see YLO do one of those TRE-like moves where the stock gains 200-400% in the matter of a few trading days as it is in a highly oversold condition.

Stay tuned as myself and several associates of mine will be analyzing YLO's business from several different angles to triangulate on the company's potential value and posting our conclusions here.

Thursday, 2 February 2012

The Ultimate TSX Biotech List

After catching EKG's run from the teens to the 40's and witnessing the great run on SBS today, it is obvious the biotech/pharma stocks are the place to be, much like how INT sparked huge gains in SCG, FSW, ISD, DIL and others last year. Biotech stocks are not really my area of expertise so I want to compile the ultimate biotech list with everyone's choices for stocks on the TSX or Venture Exchanges with an eye towards the next huge gainer. I am inviting you to post your picks in the comments section below and if they spark my interest I will look into buying and I'm sure others who see this will too. By the number of people who have posted on popular biotech message boards on Stockhouse I'm sure they will jump at the chance to promote their picks here.

What I am looking for is the company name and symbol, number of shares currently outstanding as well as any warrants or options and their strike prices to assess their dilutive potential. Write a paragraph or two that will convince me and others that your pick has the possibility of being a huge mover in the near term and provide the latest financial information. I will go first to set an example for what I am looking for as well as to be the first one to pump my pick.

MKI - The Medipattern Corporation. 57.4M shares outstanding. About 3M in stock options outstanding with 2M of those being exercisable at less than 50 cents.

Financial situation - According to the latest financials ended Sept 30th, the company has $2.3M in cash, 400K of other short term assets, 300K in short term liabilities and $6.7M in convertible debt that leads to $4M in shareholder's equity deficiency. The burn rate averages about $500-$600K a quarter and revenue has not been significant.

Reasons to buy MKI - Last year the FDA approval of their product Visualize:Vascular™, 3D imaging software used to help physicians assess vascular disease sent the stock from 5.5 cents to as high as 84 cents in two days. It has since pulled back to around 20 cents. In the meantime the company has commercialised their product and has installed their equipment in 6 hospitals as of December. Revenues are expected to increase drastically, slowing the burn rate. I expect the $2M+ in working capital to be enough until they turn a profit. The company also has a working relationship with General Electric's Healthcare division, leaving the door open to the possibility of a buyout from that company to get a hold of their technology.

Near term potential movers - Quarterly financial updates are due at the end of the month. We might see revenue from those 6 hospitals although not much since they got running late in the quarter. An announcement of sales to more hospitals could be made. If GE Healthcare or another health care company like what they see from MKI's current 6 users, they could offer a takeover bid.

This is the level of analysis I am looking for. Thank you for adding your picks and good luck with them.

Thursday, 19 January 2012

How to Find the Cheapest Uranium Stocks

I sold my Sprylogics holdings today for a decent gain in favour of two stocks. One of them is Bioexx Specialty Proteins (TSX:BXI). I have my reasons for that pick. The other is Purepoint Uranium (TSXV:PTU). I wanted to get into the Uranium market today and as you'll read on further you'll see why I feel its the cheapest Uranium stock out there.

Uranium is a very interesting sector to try to trade. The sector is made up of two types of traders - those who think they know everything, and those who know nothing. There's a very simple rule of thumb you need to know to be a successful long term trader of Uranium Stocks - it's all the same crap. And if one of the crap companies swings too high relative to another, it's time to sell the first one and buy the other. Two main events in the industry have taken place over the past year that have driven Uranium stocks to similar wild swings in stock prices and mostly huge losses - the Japanese earthquake and the buyout of Hathor Exploration. Take a look at the long term chart of Denison Mines (TSX:DML) vs Uranium One (TSX:UUU):

DML vs UUU Chart

You couldn't get two more dissimilar companies within one industry. Denison operates primarily in the relative safety of North America, Uranium One is tied to Northern Asia as their primary interest is located Kazakhstan and they are half owned by Russian interests. This leads to short periods of time when the stocks perform vastly different in the market. Referring to the chart, while UUU imploded in 2007, DML held up relatively well. But in the end it caught right back up to UUU in terms of terrible performance in October 2008. By the end of March 2009, UUU had actually been a huge winner, moving from 91 cents to nearly $3 in less than 6 months. Meanwhile DML, which was double UUU's price in July 2008 at over $8 now sat at less than $1, about a third of UUU's price. Barely 6 weeks later and both stocks were hanging around the $2 mark as DML made a quick double while UUU came back down.

Just before the Japanese earthquake last spring, Uranium was hot. UUU was doing particularly well, touching $7. DML was also up, but not nearly as much as UUU as it was $4. Since the earthquake, Uranium stocks have been pounded and both stocks came back down to the same long term historical level. Comparing them to five years ago, both stocks have lost 80%.

What does this tell you? Despite both of them having lost the bulk of their market cap since 2007, you could have made money by always investing in at least one of these stocks, but always the one that was very low in price relative to the other because eventually they will revert back to some long term mean. You would have avoided the severe drops in stock price from the stock that was priced too high while catching the 100%-200% price spikes that the one that was too low had. DML in general is about two-thirds of the stock price of UUU. If this ratio goes severely out of whack then you buy the one and sell the other.  

This theory works not just for these two, but all Uranium stocks in general, with the exception of Cameco. Since it's so large it will always outperform the others in weak periods for Uranium and underperform in strong periods. But of course you knew that big caps are always less volatile than small caps so this goes without saying.

This phenomenon seems to be exclusive to Uranium, in the mining sector anyways. Contrast the performance of DML and UUU with the 5-year chart of 5 of the most well known gold companies:

Gold company comparison chart

You'll see that while Kinross has lost 20% in the last 5 years, Goldcorp and Barrick are up 60% with Newmont and Yamana coming in order at around 40% and 20% respectively. Their divergence is long term. There are no spikes or sudden drops in any of them to take advantage of. That's the exact opposite of the UUU and DML chart where the stocks can swing wildly apart with one underperforming the other by 2x, 3x or more, only to eventually converge at some point in time.

What does this show? For something like a Gold stock, a company's location, cash flow, resources and management do make a difference in the long term. Kinross' underperformance has been apparent for 2.5 years while Goldcorp and Barrick have slowly peeled away from the pack.

For Uranium stocks, analysis means NOTHING. If one month there's some news event that makes UUU look favourable and it moves relative to Denison, buy Denison. Because you know Denison will eventually catch up to UUU, or UUU will eventually come back down to meet Denison. So how does this help finding the cheapest uranium stock?

Keep it simple. The easiest way to find the cheapest Uranium stock is to judge it by its 52 week high and 52 week low. You don't need to go through each company's MD&A to see how much resource they have in the ground or if it is in a location that's friendly for a buyout. The market has already determined that for you because if its price was once very high, that means something like a good resource find or plausible buyout rumour already took place in the past. Even if the market is stupid, don't pretend that you're smarter than it. PTU, PUC, YEL, BYU and the rest were all at high prices for some good reason, at some time.

If a stock is high relative to its 52-week high, watch out because it is currently in that "rumour" period which for everyone except Hathor generally hasn't worked out too well. It's better to buy the Uranium stock that no one is talking about today, because they will be talking about it tomorrow.

If a Uranium stock is far off from its 52-week high and close to its 52 week low, then you know that the stock doesn't have much more to fall (like UUU in October 2008 or DML in March 2009). See below for a straightforward chart that I made of all the significant Uranium companies I could find trading on the TSX. I listed their 52-week, their 52 week low, their stock price and how far off they are from each with the final column being a logarithmic ratio measuring how far they are currently off of their highs compared to their lows. The companies near the top compare the best when using this method.

Symbol           Hi           Lo        Now     x off of Hi      x off of Low          ratio
PTU        0.740         0.090         0.120             6.17                 1.33           4.63
YEL        1.230         0.120         0.180             6.83                 1.50           4.56
PUC        0.490         0.055         0.080             6.13                 1.45           4.21
BYU        1.250         0.155         0.225             5.56                 1.45           3.83
BSK        0.405         0.065         0.085             4.76                 1.31           3.64
FDC        0.520         0.055         0.095             5.47                 1.73           3.17
WCU        0.180         0.020         0.035             5.14                 1.75           2.94
FIU        1.400         0.140         0.270             5.19                 1.93           2.69
UNR        0.550         0.080         0.130             4.23                 1.63           2.60
TVC        0.425         0.065         0.105             4.05                 1.62           2.51
UCU        1.280         0.335         0.430             2.98                 1.28           2.32
URE        3.350         0.790         1.090             3.07                 1.38           2.23
EFR        1.590         0.200         0.380             4.18                 1.90           2.20
URC        0.400         0.055         0.100             4.00                 1.82           2.20
STM        1.680         0.320         0.495             3.39                 1.55           2.19
CVV        1.700         0.300         0.490             3.47                 1.63           2.12
VZZ        0.500         0.135         0.180             2.78                 1.33           2.08
UAX        0.440         0.140         0.175             2.51                 1.25           2.01
TUE        0.870         0.120         0.235             3.70                 1.96           1.89
SUV        0.080         0.020         0.030             2.67                 1.50           1.78
UUU        7.020         1.850         2.850             2.46                 1.54           1.60
NWT        0.240         0.085         0.115             2.09                 1.35           1.54
MGA        1.100         0.175         0.365             3.01                 2.09           1.44
CCO     44.280      17.250      23.230             1.91                 1.35           1.42
PWE        0.650         0.080         0.200             3.25                 2.50           1.30
U        9.500         5.000         6.180             1.54                 1.24           1.24
ULU        0.110         0.030         0.055             2.00                 1.83           1.09
DML        4.440         0.870         1.900             2.34                 2.18           1.07
FIS        1.500         0.480         0.840             1.79                 1.75           1.02
UEX        2.590         0.435         1.100             2.35                 2.53           0.93
UWE        1.320         0.245         0.600             2.20                 2.45           0.90
ESO        0.180         0.045         0.105             1.71                 2.33           0.73

For instance, PTU closed at 12 cents today. The stock traded as high as 74 cents and as low as 9 cents in the past year. 12 cents is over 6 times off the high, but is only 1.33 times the low. The last column simply divides 6.17 by 1.33 to show that PTU is over 4.5 times closer to its 52 week low than its 52 week high using logarithmic scale.

This means if Uranium gets massively hot again, PTU could double or triple it's current price and still looks like it could run more based on how traders poured money into it on past speculation. On the other end, if Uranium tanks, PTU has much less downside vs the other Uranium stocks because it doesn't have much further to go. Are you're worried about PTU's location or resource size? Why? The market pushed it up to 74 cents last year for some good reason. There's always a chance it'll do it again or at least to a level much higher than today. Like I said, don't pretend that you're smarter than the market.

Put my theory to practice and you'll see it does work. URC was one of the top 5 picks using this method just a couple days ago. Today it rose 33% and now is in the middle of the pack. On the opposite end UWE was by far the lowest ranked stock when using this method and while most Uranium small caps did well today, it got hammered. That was based on financing news but it just goes to show you management knows when their company's stock is high relative to their peers and they will take opportunities like that. When a Uranium stock runs like that, its time to exit with your profits and find a sister company. Imagine how well someone did if they looked at this ranking yesterday and dumped UWE for URC or even the one at the top of the list PTU which had a nice run today as well.

It doesn't surprise me that #2 on this list is YEL for one reason. It's unusual name, Macusani Yellowcake. When the Uranium market is cold, people who own the stock know its a Uranium stock and will sell. However, when the Uranium market is hot, not everyone looking to put money into the sector will know that it's a Uranium stock and won't know to buy it. For this reason I cannot recommend it despite it being #2 on the list.

If you trade Uranium stocks, you know exactly how things work and you may have done this yourself. If you see, for example, UUU and UWE up 20% or 30% on heavy volume in a day, the first thing you'll do is check Stockhouse or Globeinvestor or wherever you get your TSX information and look up any stock with the word Uranium in it. You might also think to look up the word energy. There's no way that in this 2 minutes of research before you decide to get in for the Uranium run are you going to think up the word Yellowcake.

You either know YEL is a Uranium stock going into the run and you take your chances that'll it'll join its sister stocks or you don't. You're not going to be introduced to the world of YEL like you will PTU, PUC or any other beat up Uranium stock in this quick research. For this reason there's a good chance YEL could continue to underperform other Uranium stocks in a huge run, at least in the short term. It's the dumbest thing, but you know its true. Traders will leave YEL behind simply because they can't find it easily. There's probably more uranium stocks that could rival PTU for tops on this list except I can't even find them myself. That makes PTU the cheapest Uranium stock on the TSX, that can be easily found anyways.

Friday, 6 January 2012

Took Some Profits on Fireswirl, Bought into Sprylogics

I took some profits on a little less than half of my FSW shares today, giving me back my original investment and leaving me with the rest of the shares at a zero cost basis. Even though I love the stock it's always good to take some off the table once an upward spike has calmed down.

I used those profits to get into Sprylogics International Corp. (TSXV:SPY). Fireswirl is a stock to get in based on numbers. Sprylogics is a stock to get based on its technology. I will have a more detailed analysis of this stock later, but in the meantime view a chart between FSW and SPY to understand where this stock will be headed with respect to the overall Venture tech basket:

INT, SCG, FSW and SPY Comparison Chart

Monday, 2 January 2012

2011 Year in Review

2011 was a tough year for stocks. While the big caps dropped marginally during the year, a lot of the small caps suffered huge losses. Many TSX Venture mining stocks are at or near all-time lows despite gold and silver breaking to new highs. That leaves a lot of opportunity for 2012 which I will be exploring throughout the year.

I started this blog in May and since then it has been particularly rough on the TSX small cap and TSX Venture stocks. That being said I managed to find quite a few gems throughout the year which led to some great profits for myself and my readers. Here's my review of each trade I made public on this site.

First Lithium Resources Inc. (TSXV:MCI): My first blog post was comparing MCI to notorious OTCBB pumped stock LEXG.  On the day of the post, May 9th, the stock closed at 12 cents. Over the next two days the stock raced to 29 cents on heavy volume as people realized that it was the one that held real value in Valleyview and that the relative market caps of the two stocks didn't jive.

Unfortunately I didn't sell in the 20's as I believed it should have hit much higher. As LEXG raced downwards the comparison looked less favourable and MCI was back down to 12 cents by the end of the month. I ended up selling a piece of my holdings in the high teens waiting for play #2 below but bought back in again later and suffered a small loss. Overall I saw marginal gains on MCI.

MCI now sits at 6 cents and despite LEXG tanking down to the 50's, it has still held higher than what many people have thought as it continues to strengthen its Valleyview holdings. Although I do not currently hold MCI, I find that it has tremendous value in Valleyview as well as its several other holdings. If it remains at a market cap that is a little over 10% of LEXG's, I will be exploring it later in the year.

Barker Minerals Ltd. (TSXV:BML): My second trade was meant to be nothing more than a short term rebound play as short sellers were obviously manipulating the stock. After buying at 7-7.5 cents, I quickly got out at 9 cents. Right now it sits at 5 cents on minuscule volume so I was right to move on. I like the properties that they own but I do not like the way they are being managed. BML makes snails seem like cheetahs in comparison with how slow they move.

The Futura Loyalty Group Inc. (TSXV:FUT): I put a lot more focus on FUT over any other trade throughout 2011. Unfortunately FUT hasn't panned out the way I thought it would so far. With that being said, after my wave of blog posts on May 24 the stock shot up from 3 cents to 6.5 cents as people saw exactly the same things that I saw. I bought over a million shares at 3 and 3.5 cents and I took a couple hundred thousand off the table at 5.5 and 6. However I continue to hold about a million shares to this day, occasionally trading a hundred thousand or so for a bit of profit when I see fit.

Despite the success of my closed trades on the stock, considering the current price is at 2-2.5 cents and the amount of time I spent on the trade, I have to consider this to be a failure for 2011. I believe 2012 will be a much different story. The premise of Futura's business is excellent, the management team seems quite adept and knowledgeable at managing growth with cash constraints and the business is extremely transparent. If you refer to their website, you will see a list of their customers that is updated several times each month. Very rarely do you see that type of honest insight into a Venture company. Maybe that's part of the problem. There's no mystery or intrigue to FUT so it's not so easy to pump up the stock price like INT or PYN.

Their Q3 results were relatively disappointing to me as I expected higher revenue based on their growth in the customer base but I await positive results in Q4 and beyond. But until then I'm holding the million shares in the background as I am focused on one of FUT's brothers in the whole TSX Venture tech sector explosion we saw in 2011.

Sino Forest Corp (TSX:TRE): Trade #4 was my most fun and profitable trade for 2011. On the morning of June 22nd I announced that I bought TRE in the 2's (and some in the 1's the day before). I felt at the time that the stock was being manipulated for someone to take it out at $5. A lot of people seemed to agree with me and the stock continued to appreciate that day until it closed up 50%. Although I don't think my blog was the sole reason, I like to think that I did add some fuel to the fire that day. While my reasons listed in the blog may or may not turn out to be correct, the call certainly was and I spent the summer that was treacherous for small cap stocks collecting greater than 100% gains on TRE. I got out just in time for call #5 and #6 and hopefully my followers listened and did too.

Afexa Life Sciences Inc. (TSX:FXA): I used much of my TRE profits and put that into Afexa in July in the mid-50's. While my guess of TRE's buyout has not materialized yet, my guess of FXA's buyout came to fruition just a few weeks later. I sold in the 70's as the stock finally settled at 84 cents before being taken private. A near 50% gain on top of an over 100% gain on TRE led me to a summer of great profits despite the brutal market performance.

Cyberplex Inc. (TSX:CX): Cyberplex was an interesting trade. Unlike the others where I built up a position over several days prior to my blog post, CX was the first stock where I went all in one day after my blog post. I cleared out everything that was being offered at 11 cents on September 19th. That was probably enough to keep the stock on everybody's radar so while the market dropped 8% in two days starting September 20th, CX rose to 16 cents.

Despite my belief that the stock should be at least 25 cents, I sold at 15 as I licked my chops from the multi-month lows that were being had on several stocks. But one stock in particular stood out as it dropped to less than 10 cents, my next trade. But keeping on the subject of CX - it stumps me as to why the stock continues to struggle at 8.5 cents. They hit the upper end of their Q3 guidance. They got more favourable debt terms from their lender. They appear to be on the right track with Yahoo! If someone doesn't believe they can earn enough profits to successfully pay off their debt that's fine. But those issues all existed last January when the stock was over 50 cents. They should have sold back then. Cyberplex is in much better shape now than they were a year ago but the stock is down to 8.5 cents. The complete herd mentality is so apparent in the Canadian investing community. CX is an anti-herd stock that will provide investors at sub-10 cents a good return on their investment once it is hot again. For now I am not in CX but I am waiting like a vulture if the stock drops low enough.

Fireswirl Technologies Inc. (TSXV:FSW): While my first blog post dedicated to FSW was on December 5th, I was actually building my position over the course of several months. As mentioned, I sold out of CX to start my FSW position at 10 cents in late September. Throughout the course of the fall I steadily built up my position.

I had the opportunity to sell twice over 16 cents as FSW's contract with China's No.1 Animation Brand and excellent Q3 results resulted in two separate pops in October and November. But I wasn't about to let go of the stock at those prices and in retrospect that was a good move. Since my blog post on December 5th, the stock has doubled in price, moving from 11.5 cents to 23.5 cents. While my blog might have had some short term influence in early December, unlike MCI and CX which came back down shortly thereafter, FSW had a short pull back but rallied after Christmas and is now at its highest stock price since early July.

Despite its recent double in price it compares very favourably vs other TSX Venture tech peers. As we head into RSP and investing season, I should note that at the beginning of last February, the stock quickly rose from 5 cents to as high as 38 cents. FSW is an excellent stock to be in at the start of 2012 and I'm proud that it has resulted in more than 100% gains for myself, 100% gains for my early readers and good returns even for the late buyers in the high teens and low 20's. And it appears that the run is just getting started. It could bust through 52-week highs as speculation grows that their earnings in Q4 will be great.

Actually, I should restate that. It SHOULD bust through 52-week highs. In fact, it SHOULD already be double or triple those highs. The Price to Sales metric is less than 0.5x. In comparison, AMZN's, the e-commerce giant in the US, is 1.8x. MELI, the e-commerce giant of South America, is 13x. INT, the TSX Venture tech darling, is nearly 30x. A good Q4 likely results in $25M of revenue for 2011 for a $10.5M market cap stock. A mediocre Q4 still results in $22-$23M of revenue for the same $10.5M market cap stock.

Thursday, 29 December 2011

TSX Venture Tech Sector Value Comparison Update

As Intertainment Media finally decided to release their calendar Q3 (their fiscal Q1) numbers over the holidays, I managed to update the financial comparison between the four Venture tech companies outlined below. For the original post, see here.

With some of the most widely traded TSX Venture tech sector companies having released their Q3 2011 financials recently, it makes it a great time to review their financial performance to see which company is most undervalued relative to the others. The four companies in this comparison are Fireswirl Technologies, Inc., SelectCore Ltd., Intertainment Media Inc., and Poynt Corporation. The chart below summarizes their shares outstanding, stock price and market capitalization statistics, compiled from

Company NameSymbol  Shares (000's)    Stock Price    Market Cap (000's)
FireswirlFSW             44,641              0.210                           9,375
SelectCoreSCG           123,815              0.280                         34,668
Intertainment MediaINT           312,804              0.490                      153,274
PoyntPYN           489,841              0.130                         63,679

Since December 6th, FSW, SCG and INT have all increased in price, with PYN falling. PYN increased their share count by about 10M to offset some of the market cap decrease as a result of their price decline. The chart shows that FSW has by far the least amount of shares outstanding, with PYN having the most. INT has the highest market cap while FSW has the lowest. By taking a look into the revenue profile of the last seven quarters, we can see if these relative market caps are justified.

Revenue (000's)Q1 2010Q2 2010Q3 2010Q4 2010Q1 2011Q2 2011Q3 2011  Last 4Qs
FSW     4,169      4,778      4,744      6,585      4,177      5,002      5,957 21,722
SCG  20,726   31,666   26,065   24,766   20,987   22,027   21,144 88,925
INT     1,273      1,299      1,379      1,403      1,168      1,375     1,279 5,225
PYN        192         215         255         339         536         573         734 2,182

We see above that SCG has by far the highest amount of revenue at over $20M a quarter, followed by FSW averaging around $5M a quarter, then INT at less than $1.5M and PYN at less than a million a quarter. Looking purely at the revenue numbers doesn't tell us the whole story, however, we must also look at the quality of the revenues being earned.

SCG's revenues have thus far been primarily from the prepaid cell phone card business while the higher margin financial services revenues are still in their infancy stage. INT revenues have been from their legacy digitial publishing business rather than their social media products. Only FSW and PYN earn the bulk of their revenues in their respective industries of focus. PYN's revenues are in their startup phase but growing rather quickly. FSW's revenues are more mature but are also growing at a great pace, particularly in Q3 2011.

The quality of each company's revenues can also be judged by their earnings. See the next two charts for the last 7 quarters of comprehensive net income for each company and net margin as a percentage of total revenues.

Net Inc (000's)  Q1 2010  Q2 2010  Q3 2010  Q4 2010  Q1 2011  Q2 2011  Q3 2011  Last 4Qs
INT-1,418-1,669-1,207-1,347-6,211-4,797      -3,748-16,103

Net Inc % of Rev  Q1 2010  Q2 2010  Q3 2010  Q4 2010  Q1 2011Q2   2011 Q3  2011  Last 4Qs
INT-111%-128%-88%-96%-532%-349%      -293%-308%

PYN has a signficant burn rate and revenues must be drastically increased before they start to make money. While revenues have increased greatly over last year, so have their costs and the company still sees margins at over -500%. They will likely need $6-7M revenue a quarter before they breakeven which could be 2 years or more away.

INT has a similar bad burn rate that is increasing with time but their business model is a little different. Their primary focus is asset value creation rather than upfront revenues where they burn cash in support of their products in hopes of spinning them off, namely Ortsbo, thus creating value for their shareholders.

SCG is the only company out of the four with two positive earnings quarters under their belt. But their past two quarters' losses have been particularly large as they transform their business.

FSW put up a positive income figure for Q3 2011, a company first, and leads the way as the company that is closest to breakeven as they lost just over $1M for the past four quarters. They are the only company out of the four whose net margin is headed in the right direction.

The final chart will compare some industry revenue and growth metrics. The first metric will be Price to Sales (market cap to revenue), the second will be Q3 2011 revenue growth when compared to Q3 2010 and the third will be YTD 2011 revenue growth vs the first three quarters of 2010.

Revenue Metrics    Price to Sales      Q311/Q310 %Incr      Q311/Q310 YTD %Incr
FSW                   0.43 25.6%10.6%
SCG                   0.39 -18.9%-18.2%
INT                29.33                              -7.2%-3.3%
PYN                29.18 187.7%178.3%

FSW and SCG are very close in terms of price to sales but as mentioned before the quality of those revenues are vastly different. FSW's revenues are solely from their primary focus of operating online retail stores for various brands in China but SCG's revenues currently contain very little of their Iridium prepaid card business plan thus far. FSW's revenues are also growing with a 25.6% Q3 2011 vs Q3 2010 growth rate and 10.6% YTD vs the first three quarters of 2010. SCG's revenues are shrinking during their transition phase, down over 18% for Q3 as well as YTD vs 2010. The December 6th version of this comparison showed FSW to have a lower price to sales than SCG, but because FSW has increased in price more than SCG since then, SCG's P/S is now slightly lower.

INT and PYN are over 70 times more costly in terms of Price to Sales vs the other two companies. This difference is actually down from the December 6th version thanks to the changes in stock prices. PYN has by far the largest % increase in revenues, however it would have to continue this vast increase for several quarters before it gets to a level close to breakeven. Their market cap exceeds FSW's market cap by sevenfold despite being much further away from profitability. Both companies have business plans that could see massive growth to revenues so it is way too early to say that one company is justified in having a price to sales metric that is 70 times higher than the other.


While people will find this comparison useful for their own investing purposes, the conclusion is quite clear. FSW has a reasonable amount of shares and a very modest market cap compared to the other three despite having much higher revenues than PYN or INT. They have a fully implemented and growing business plan unlike their comparable SCG who are in the transition phase away from their low-margin legacy revenues. FSW is the closest to profitability when looking at Q3 2011 numbers and are poised for a big quarter in Q4 based on the seasonality of the online retail business and the contracts they signed to expand their business at the start of Q4.

While the other companies might be focused on product value creation through the increased number of users, FSW is the only company putting a growing amount of money in their pocket now. FSW's users are actually customers looking to spend money in an online environment, not just users of a free online platform. Investors are catching on to FSW as it is up 75% for the month of December.

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