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APPY Options Appear Mispriced into Results

|Includes:Venaxis, Inc. (APPY)
APPY is slated to report top-line results for AppyScore by mid-May.  Based on a quick analysis, options appear to be significantly mispriced and do not currently represent potential upside based on historic valuation benchmarks. 

In January 2009, prior
to results on AppyScore (which were ultimately viewed unfavorably by the market causing the shares to plummet), the market collectively valued APPY at $238 million (= fully diluted shares outstanding of 31.2 million(1) x $7.63 share price(2)).  Let’s assume this represents a base valuation for AppyScore and let’s also assume that the value of this technology has not changed substantially since January 2009.  If we take the $238 million value and divide by today’s fully diluted shares outstanding of 37.5 million(3), we get a price per share of $6.34.  Options are currently only pricing an upward move of around $0.75~$1.00 from Friday, April 9, 2010’s closing price of $2.33.  If results are positive, the shares should logically trade north of this $6.34 value at the very least (assuming our assumptions are valid).  

The market is apparently not very confident in the up-and-coming results.  This may represent a very low risk / high reward trade for Call option buyers.  

(1)  As of December 31, 2008.
(2)  Closing price as of January 16, 2009.
(3)  As of March 5, 2010.

Disclosure: Long APPY Call Options
Stocks: APPY