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The fact that RHWC is currently a 10 cent stock blows us away. We will show you why. There is a NASDAQ listed company called Accredited Home Lenders (NASDAQ: LEND) that offers a glimpse of what Reliant has the potential to become. Like Reliant, Accredited Home Lenders is a company that originates, finances, securitizes, services, and sells nonprime mortgage loans. Even though it is a relatively young company with its founding in 1990, Accredited has gotten revenues of practically $600 million and a market capitalization of just over $1 billion. This is pretty good for a sixteen year old company! When you look at the principal statistics for most mortgage related stocks, they tend to have market capitalizations that are approximately twice their annual revenue. This rough equation practically applies to the numbers for Accredited Home Lenders. The same goes for New Century Financial Corporation (NYSE: NEW) and Countrywide Financial Corporation (NYSE: CFC). NEW has revenue of $1.3 billion and a market capitalization of $2.6 billion while CFC has revenue of $11 billion and a market capitalization of $23 billion. As you can notice, in each of these cases, the market capitalization is approximately two times the company's revenue. We know that this is a very crude measurement, but we will apply this formula to Reliant. According to company statements, Reliant is projecting revenue of $750 million during its first full year of operations. With such revenue and our roughhewn revenue/market-cap formula, Reliant would have a market capitalization of $1.5 billion and a share price of nearly $9. From its current share price of a dime, a share price of $9 would provide a gain of nearly 9000%! Now, misunderstand us. We are in no way suggesting that Reliant is going to have a future share price of $9. The previously mentioned mortgage companies are mature with well established market contacts and referral bases. At this point, Reliant is not as mature as those other companies. Reliant was founded in March 2005 as a stock exchange agreement allowed the current board of directors to assume control of the company. Over the past year, the company has worked diligently to establish contacts and referral bases that will set it up for successful operations similar to those of LEND, NEW, and CFC. In real meaning, Reliant has just lately opened for business. On July 21, 2006 Reliant launched its first residential mortgage product. This is a totally new company and we have the opportunity to get in on the ground floor! Even if Reliant only achieves half of its revenue goal of $750 million, the company would still provide investors with a handsome return according to the abovementioned revenue/market-cap formula.
To some people, the thought of a penny stock offering quadruple digit gains may perhaps sound nonsensical. As crazy as it seems, the fact of the matter is that gains such as these actually do occur. During the internet boom of the late 1990's, this scenario played out dozens of times. Even nowadays, some penny stocks are still making dreams come true. Over the past few years stocks such as SIJF, SCHK, SDRG, IPWG, BMD, GRSR, and FTK have offered potential gains varying in range from 2000-8000%! Do you consider that RHWC might be the next penny stock that makes dreams come true? Who knows? What we do know is that the company looks pretty good to us!