Part of the reason contributing to the rise is the double profit that the company achieved for the first quarter of this year. Besides, the company just announced a new 850,000 square-foot manufacturing facility in Israel. The new primary site is expected to go live during 2013 at an approximate cost of US $42.9 million.
That is the irrationality of the stock market, swinging from over-pessimism to over-optimism. The current price of $76 a share, the total shares outstanding are 18.38 millions, makes the total market capitalization of SODA $1.4 billions, making valuation P/E TTM at 66.2, P/B at 8.1. Any value investors that heard of initial valuation would walk away.
From the time of 2008 to 2011, the net income of the company has made the record, increasing from around $1 million to $13.9 millions end of 2010. However, the increase in the net income in 2010 does not match up with the increase in operating cash flow. The operating cash flow is at -$11.7 millions in 2010, and its net income is at $11.7 millions, a gap of $23.4 millions. A reason for that gap is the increase in inventory and the increase in accounts receivables. The inventory can be understandable of expanding the business, but the increase in A/R normally gives us a concern.
The sudden increase in common stock (book value) from $23.8 millions to $154.7 millions, mainly from the increase in paid in capital in 2010. The company has little cash, little retained earnings (only $20 millions), and phenomenal growth in net income, but the cash flow is suffering. Combined with very high trailing P/E, high P/B makes the stock less attractive now for any value investors.
For the short term SODA might still keep rising, but I do not think the trend would continue so far. There is high probability that SODA needs to adjust to be back to its intrinsic value. But if the performance of the company in the future is good, sustainable incorporating with growth, the chance of fast rising intrinsic value might happen.
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