MORE HEALTH CARE PLEASE
CNU
I have been very quiet for the past few days. But I have been focus on research and have found a few stocks I like. Unfortunately, I am pretty much fully invested at this point. Good thing is all these stocks are fairly small and rather thinly traded, and probably will not jump up dramatically.
I did sold Q and RFC to raise some fund and put a bid for CNU this morning, a small cap (just over 100 million) in the health care industry. I could not find any weakness in this one. Top line growth: 10% over the past five years; Bottom line growth: 30%+ over the past three years; Operating income: over 100% 04/03; and 86% 05/04; Book value: over 100% over the past three years; Growth visability is good, driven by: increasing reimbursement rate; lower claim costs; increase patient volume, open more service centers, and selective acquisitions. Balance sheet is clean with more than $5.0 on book and a lot of working capital (mostly consisting of reimbursement receivables from government). Demographics: favorable with aging population and increasing demand for health care, particularly in the state of Florada. Strong return on equity (over 35%), strong return on assets, and return on capital. A lot of insiders purchases and a large share repurchase program (It has bought a lot of shares in the 2.5 range, showing a lot of confidence). It is in a rather defensive and non-cyclical industry and will not be as vulnerable to a potential economic slow down. Valuation is very reasonable, traded at only 13X of its 05 EPS. I conservatively expect it to make about 0.20 in fiscal year 2006, which will make its P/E at 11.5X. It is small, no analyst coverage. It scores a rather hgih 50 on my little proprietary model. If the company continues to deliver its quarters, I expect both solid earning growth, and multiple expansion. Even at 15X, it should be trading at about $3.0 within 12 months. The only drawback I can see is that it starts to pay taxes this year, which could impact on its EPS and it is rather thinly traded. This one is a sleeper though and it may require a lot of patience. (Filled at 2.29).
ATRI
Another small cap ($120 million market cap) that I could not find any weakness. Very strong growth, top-line, operating income and bottom-line (30%+); Steady improvement of margins; Strong balance sheet; Very strong cash flow; Paying a decent dividend; Strong management; Valuation is very reasonable, traded at 18X of its 2004 EPS, and 17X of its nine months 2005 EPS. Very reasonable indeed for a company growing at 30% over the past five years, in an industry where almost everyone is traded above 30x multiple. No analyst coverage. Again it is in a non-cyclical, defensive industry. The only problem is that it has less than 1.8 million shares outstanding and very thinly traded. (The other problem is that I have no money). I got to raise some fund and I need to buy this one.
I have been very quiet for the past few days. But I have been focus on research and have found a few stocks I like. Unfortunately, I am pretty much fully invested at this point. Good thing is all these stocks are fairly small and rather thinly traded, and probably will not jump up dramatically.
I did sold Q and RFC to raise some fund and put a bid for CNU this morning, a small cap (just over 100 million) in the health care industry. I could not find any weakness in this one. Top line growth: 10% over the past five years; Bottom line growth: 30%+ over the past three years; Operating income: over 100% 04/03; and 86% 05/04; Book value: over 100% over the past three years; Growth visability is good, driven by: increasing reimbursement rate; lower claim costs; increase patient volume, open more service centers, and selective acquisitions. Balance sheet is clean with more than $5.0 on book and a lot of working capital (mostly consisting of reimbursement receivables from government). Demographics: favorable with aging population and increasing demand for health care, particularly in the state of Florada. Strong return on equity (over 35%), strong return on assets, and return on capital. A lot of insiders purchases and a large share repurchase program (It has bought a lot of shares in the 2.5 range, showing a lot of confidence). It is in a rather defensive and non-cyclical industry and will not be as vulnerable to a potential economic slow down. Valuation is very reasonable, traded at only 13X of its 05 EPS. I conservatively expect it to make about 0.20 in fiscal year 2006, which will make its P/E at 11.5X. It is small, no analyst coverage. It scores a rather hgih 50 on my little proprietary model. If the company continues to deliver its quarters, I expect both solid earning growth, and multiple expansion. Even at 15X, it should be trading at about $3.0 within 12 months. The only drawback I can see is that it starts to pay taxes this year, which could impact on its EPS and it is rather thinly traded. This one is a sleeper though and it may require a lot of patience. (Filled at 2.29).
ATRI
Another small cap ($120 million market cap) that I could not find any weakness. Very strong growth, top-line, operating income and bottom-line (30%+); Steady improvement of margins; Strong balance sheet; Very strong cash flow; Paying a decent dividend; Strong management; Valuation is very reasonable, traded at 18X of its 2004 EPS, and 17X of its nine months 2005 EPS. Very reasonable indeed for a company growing at 30% over the past five years, in an industry where almost everyone is traded above 30x multiple. No analyst coverage. Again it is in a non-cyclical, defensive industry. The only problem is that it has less than 1.8 million shares outstanding and very thinly traded. (The other problem is that I have no money). I got to raise some fund and I need to buy this one.
posted by ZIGZAG at 12/14/2005 10:36:00 PM
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