On November 10, 2006 Hostopia went public at $6.00 per share (Toronto venture stock exchange. Ticker symbol H). We now have a new pure- play publicly traded Market Hoster (MMH) for the market to put a value on.
Hostopia issued 4.2 million shares or roughly 43% of the 11.2 million current shares (and in the money options) outstanding post IPO.
Five days later Hostopia issued its earnings release for the quarter ending September 30, 2006. In the release they reported quarterly revenue of $US5.585 million and EBITDA of $US1.286 million (an EBITDA margin of 23%).
Given the high growth of the business (about 30% year over year) we annualize the most recent quarter to get a truer picture of the businesses operating metrics and valuation ratios.
After annualizing the revenue and EBITDA of the business and multiplying those numbers into the Enterprise Value of the business we calculate that Hostopia is presently trading at 1.7x Price-to-Revenue and 7.5x Price-to-EBITDA.
As we write Hostopia trades at $6.20 per share Canadia ($5.47US). Since opening the stock price has traded close to its IPO pricing and trading volume has been thin. It is too early to know how trading will begin to settle.
Is this a good price for MMH's? Do other MMH's deserve a high or lower valuation? Recent private deals have been at lower multiples.
More importantly how effectively will the business spend $19 million in new cash?
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