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Offline clayop

Market indicators of BitShares?
« on: May 14, 2015, 06:53:44 AM »

For traditional investors, especially value investors who should be our one of potential target, market indicators such as EPS, PER, and PBR are very important because they directly show the status of a company. As a decentralized COMPANY, BitShares can have these kind of indicators. So I tried to calculate them. All numbers are based on six-month period.

1. Profit : I assume profits as decreased amount of shares (burned fee).
  2014/11/13 : 2,488 million BTS
  2015/05/13 : 2,511 million BTS
  Difference   :   -13 million BTS
  Profit = -13 million * current price ($0.0039) =  - $50,700 (deficit)

2. EPS
  $50,700 / 2,511 million BTS = - $0.0000202

3. PER = $0.0039 / - $0.0000202 = -193.06

4. PBR and ROE = N/A


Any comments are more than welcome.
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Offline merivercap

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Re: Market indicators of BitShares?
« Reply #1 on: May 14, 2015, 08:59:32 AM »
The intrinsic value of a company is the present value of future dividends or cash flow.   You can do a discounted cash flow calculation based on projections if you really wanted to. 

Since future cash flows are uncertain in the early stages, P/E multiple is often used as a quick indicator of value. 

Price per share / Earnings per share = Market cap / Earnings. 
Market Cap is: 2.5 Billion BTS
Earnings would be: transaction fees - delegate pay (trailing twelve months)

I would look at Price to Sales as a better market indicator.  It gives you more information about traction than Price to Earnings especially in the early stages of a company. 

Price per share/ Revenue per share = Market Cap / Revenue
Market Cap is: 2.5 Billion BTS
Revenue would be: transaction fees (trailing twelve months)

Can someone calculate the trailing twelve month transaction fee revenue & delegate pay?  We can also calculate forward looking ratios based on earnings and revenue from more recent history. 
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Offline Ander

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Re: Market indicators of BitShares?
« Reply #2 on: May 14, 2015, 05:54:49 PM »
We are really what would be called a pre-Revenue company right now.  A startup.

In the future doing this calculation would tell you something useful, but for now its just going to show you how close or far away we are from catching on.
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Offline merivercap

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Re: Market indicators of BitShares?
« Reply #3 on: May 15, 2015, 12:37:30 AM »
We are really what would be called a pre-Revenue company right now.  A startup.

In the future doing this calculation would tell you something useful, but for now its just going to show you how close or far away we are from catching on.

Yeah I agree, but we can project a really really rough estimate of value.   In terms of quantifying value-creation we can measure transaction volume for trading and purchases.

There are two target markets: 
1) traders & speculators 
2) merchants & consumers

We can estimate what people would pay for trading & payment services to estimate revenue. You will have to charge lower transaction fees for group one because you'll have higher transaction volumes.  (You can charge maybe 0.1%?  Bitfinex charges 0.2% for takers and 0.1% or lower for makers so let's say they get around .25% or 25 basis pts per trade) You can charge higher transaction fees for group two but will have lower volume. (Probably can charge up to 1%)  The Bitshares platform also has to leave room for 3rd party platforms to profit as well. 

Let's say a reasonable 3-yr goal for the Bitshares ecosystem will be:
1) Reach $5 million in transaction volume/day (size of Bitfinex) in trading
2) Reach $500k purchase transaction volume/day (Note: Dwolla hit $1 Billion in annual transaction volume in about 3-4 years.)

Trading revenue estimates at 0.1% x $5 million = $5,000 per day = $1.825 million/year
Purchase revenue estimates at 1% x $500k = $5,000 per day = $1.825 million/year
Total revenue = $3.65 million/year

So if we can reach those goals we can estimate a valuation of $18.25 million based on a price/sales ratio of 5.  We get a valuation est. of $36.5 million with P/S of 10. (You can use higher P/S ratios than most industries because this is a high margin & growth business.  You can also use P/E ratios or discounted cash flow (DCF) analysis)  Now if we can increase volume in both categories even faster that would be fantastic, but there's still a lot of work to do. 

BTW do transaction fees go on both sides of a trade on the internal exchange?

It's interesting to think about the revenue model.  In the early stages of a company you probably want to have the least friction as possible to obtain maximum network effect before increasing transaction fees.  On the other hand transaction fees may be used to grow and you can validate the business assumptions.  I would probably prefer having negligible transaction fees and funding operations via dilution to minimize friction and maximize network effect. 

« Last Edit: May 15, 2015, 12:39:15 AM by merivercap »
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Tuck Fheman

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Re: Market indicators of BitShares?
« Reply #4 on: May 15, 2015, 01:01:16 AM »
What comes out of Dan's mouth is my market indicator.

I analyze the comments he makes and weigh the positive responses against the negative responses, and then I go check the levels at the BitShares Kool-Aid Storage Tank and act accordingly.

ProTip : It never hurts to mix some JD in with your BKA.

jaran

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Re: Market indicators of BitShares?
« Reply #5 on: May 15, 2015, 02:09:33 AM »

Offline clayop

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