Kakuzi Ltd had a trading price of Kshs 34.00 as at February 4th 2010. With 19,599,999 outstanding shares, this translates to a market capitalization of Kshs666,399,966.00. Five weeks later, on March 10th 2010, the prices had gone up to Kshs 78.00, translating to a market capitalization of Kshs 1,528,799,922.00
For the period ending December 31st 2009, Kakuzi Ltd reported revenues for the year as Kshs2,008,157,000.00, which was a 24.5% improvement on 2008 reported revenues. Comparing the market capitalization to the company’s revenues gives us the Price-to-Sales Ratio… for every shilling of revenues, how much are the investors paying? The lower the ratio, the better the investment.
The Price-to-Sales ratio of Kakuzi as of February 4th 2010 was 0.33. For every Kshs1 in revenues, investors buying the Kakuzi Ltd share were paying 33Cents! The Price-to-Sales ratio as of March 10th 2010 was 0.76. The investors were trading the share at Kshs78.00; for every Kshs1 in revenues, they were paying 76Cents.
The bottom line of doing any business is making profits. The question on this then becomes, how much of every Kshs 1 that Kakuzi Ltd collected as revenues actually turned into profit, hence wealth for the shareholder?
Of every Kshs 1 in revenues, Kakuzi Ltd made in 2009, it retained Kshs0.17 as shareholders’ profits in 2009 compared to Kshs0.16 in 2008… a 6.3% improvement.
Fundamentally, nothing changed in Kakuzi Ltd within the month of February. Why then are the investors paying a 130 % more for the share now than they were a month earlier?
There are three explanations to this:
•Fundamentally... Kakuzi Ltd had not yet disclosed its financial results for the year 2009 as of March 10th 2010. As such, any interpretation of the company’s performance was based on investor expectations,
• Technically... The demands for the share in the market outweighs the supply of the share thus forcing those who want to buy the share quote higher prices for it.
•Bahaviour..ally.. Emotions; fear of losing out in making quick gains, or greed.
I bet the last one has more relevance than the other two.

@sparkly.. where on earth do i get the cashflow statement???

@mufasa.. my point has nothing to do with stock trading,speculating or gambling..so for those joy riding kakuzi..have fun....note also sasini projections for next 2 years
this it's about that investor huko nje bila idea what cuts what in stock market..investor education.

@ ProverB: your analysis could be right, am not disputing that. My point is in answering your question" Why then are the investors paying a 130 % more for the share now than they were a month earlier?" @mkonomtupu: you'd better jump into the Agri's before the foreigners get into them.

17+ EPS...