RedChip announced that it will begin research coverage on Onstream Media Corp, a leading Application Service Provider of live and on-demand, rich media communications.
The company recently introduced a set of enhancements to its proprietary webcasting platform, including a webinar service providing the means to hold a virtual seminar online in real time, a Flash-based player, embedded Flash video, and audio and video editing capabilities.
RedChip Research’s Analyst, Piyali Chakravarty, M.B.A., wrote in the report, “ONSM has a current price/sales multiple of about 5, and we are estimating revenue of $16.8 million for the full FY08. In ONSM’s August 2007 10Q filing, the ending number of shares disclosed by the company was approximately 42 million. We use this number to represent shares outstanding for FY08, which is subject to possible other conversion of warrants and convertible securities.”
He continued, “We are expecting the company to generate revenues of $0.40 on a per share basis in FY08. The company’s revenues are growing faster than 50 percent of its peer group. We believe it would be quite realistic to assign a P/S multiple of 8, which is only slightly higher than the average multiple for the peer group and represents a 33 percent increase from current multiple levels for ONSM.”
“The P/S multiple of 8 that we are assigning to ONSM is 64% less than that of ONT, which has a similar pattern of revenue growth rate as ONSM. Therefore, by multiplying the full year FY08 revenue per share estimate of $0.40 by a P/S multiple of 8, we arrived at our target price of $3.20, which represents substantial appreciation from current levels,” the analyst concluded.
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