Why A123 Systems Still Not Worth It
Clearly, numbers like this make it impossible to value A123 in a traditional way, and assumptions are necessary to make any kind of a forecast. To do this, I created a few very generous hypothetical scenarios and tried to answer my original question: "What revenue and margin forecasts are required to justify the current valuation of A123?" I assume a generous, full-year hypothetical 2009 and then compare it to a very generous hypothetical 2011, making assumptions for revenue growth and margin improvement. My analysis looks like this.
From the table above, it can be seen that in order to justify a P/E multiple of 100, it will have to do the following things:
- quadruple revenue.
- transform from negative gross margins to margins of 25%.
- maintain operating expenses at current levels with no increase.
- pay no income taxes due to tax-loss carry forwards.
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