pe query

A friend and I are at a disagreement on the value of AZG. He says it is still too expensive. His arguments are that there are too many current tax benefits and liabilities on the balance sheet. He quickly values AZG by taking pretax profits $2,806,303 taking a 30% tax rate getting $1,964,412 (His NPAT). Using 245,255,400 share outstanding (shares outstanding and options excercised) he comes up with EPS =.8c thus P/E ratio of ~18 which is expensive for him. Further, AZG is not FCF positive and growing acquisition through issuing of shares.

Although he agrees that 2012's order book has signs of growth for AZG it is the years after 2012 that he cant see. He isn't willing to pay growth at growth prices if he cant see far into the future of AZG. Business risks of Arconn include no contract wins going into 2013, 2014....future as well as its maintenance division unable to secure work.

He is only willing to pay 8-10c. Any thoughts?