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Thursday, 5 April 2007
Immucor (BLUD)

 

CLICK HERE FOR MY PODCAST ON IMMUCOR (BLUD)

 

Hello Friends!  Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice!  As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

As I reported earlier today, after reviewing my AZZ stock purchase closely (after I hastily purchased some shares) I realized that fiscal year 2008 had been guided lower.  The stock is still an interesting selection, but it doesn't really fit my own strategy of looking for stocks with growing revenue and increasing earnings.  Especially when the company announces that the upcoming year will be a downturn for its results. I can go down a list of excuses why I missed that story before I purchased the stock, but excuses are excuses and I simply made a mistake. 

Looking through the list of top % gainers today, I saw that Immucor (BLUD) a stock that I had previously reviewed almost exactly a year ago, when the stock was trading at $20.51, adjusted for a 3:2 stock split on May 16, 2006, was trading at $33.76, up $2.83 or 9.15% on the day.  After reviewing some of the data a little closer (I hope), I decided that this stock made much more sense for me than my AZZ stock, and decided to over-ride my selling rules, and essentially undid my purchase in AZZ and placed Immucor (BLUD) in my trading portfolio.  I went ahead and replaced my AZZ with 180 shares of BLUD which I purchased at a price of $33.80.  

Let's take a closer look at Immucor and I will show you (and double check!) my findings on this company, explaining why this is a better fit for my own strategy.

IMMUCOR (BLUD) IS RATED A BUY 

What exactly does this company do?

According to the Yahoo "Profile" on Immucor, the company

"...and its subsidiaries engage in the development, manufacture, and sale of reagents and automated systems. These are used primarily by hospitals, clinical laboratories, and blood banks in various tests performed to detect and identify certain properties of the cell and serum components of human blood prior to blood transfusion."

How did they do in the latest quarter reported? 

It was the announcement of third quarter 2007 results yesterday after the close of trading that led to the big upward pressure on the stock price today.  Revenue for the fiscal third quarter ended February 28, 2007, came in at $57.1 million, up 21% from $47.1 million in the same period last year.  Net income came in at $15.0 million, up 28% from $11.7 million during the same period last year.  Diluted earnings per share came in at $.21/share up from $.17/share last year. 

The company beat expectations of earnings of $.20/share on revenue of $55 million.   

These results did not go unnoticed--the Motley Fool commented on these results:

"There were no apparent soft spots in the quarterly earnings release. On a per-share basis, Immucor's earnings increased by 24% over the year-ago quarter, and revenue for the quarter reached $57.1 million for an increase of 21%. Other positive takeaways were that sales of traditional reagent products increased 22% over the prior-year quarter and Immucor's instrument sales increased by 22%.

One thing that never hurts is when you're able to name your own price. And maybe the most notable revelation from management is about the pricing power the company now has. About 82% of the company's revenue increase from the year-ago quarter can be attributed to price increases in the U.S. This pushed the company's gross margin to 70.7%, up from 68.2% in the year-ago quarter."

What about longer-term financial results?

Examining the Morningstar.com "5-Yr Restated" financials on BLUD, we can see a beautiful picture of steadily increasing purple bars on the chart showing the revenue growth with revenue climbing from $84 million in 2002 to $184 million in 2006 and $203 million in the trailing twelve months (TTM).

Earnings were almost as nice, except for a dip from $.21/share in 2003 to $.18/share in 2004, they climbed from $.16/share in 2002 to $.59/share in 2006 and $.75/share in the TTM.

The company has slowly increased its outstanding shares from 55 million in 2002 to 69 million in the TTM.  This approximately 25% increase in the float, occurred while revenue was increasing about 150% and earnings were up over 300%.  This is a tolerable dilution in the shares from my perspective.

Free cash flow has been positive and fairly steadily growing from $16 million in 2004 to $52 million in 2006.  Free cash flow during the TTM has been slightly less at $41 million.

The balance sheet on Morningstar.com appears solid with $75.2 million in cash, which by itself can easily cover both the current liabilities of $25.3 million and the $19.8 million and have approximately $30 million left over!  Calculating the 'current ratio', which I consider healthy if at 1.25 or higher, we find a total of current assets of $151.2 million, which when divided by the $25.3 million, yields a current ratio of 5.98, one of the highest current ratios on this blog!

What about some valuation numbers?

Reviewing the Yahoo "Key Statistics" on Immucor, we can see that this is a mid cap stock with a market capitalization of $2.32 billion.  The trailing p/e is rich at 47.22, but the forward p/e is better (fye 31-May-08) estimated at 34.10.  In spite of the rich p/e, the growth rate is sufficient to bring the PEG ratio (5 yr expected) below 1.0 to 0.92, suggesting a very reasonable valuation based on the anticipated growth in earnings.

Examining the Fidelity.com eresearch website, we can see that the stock is reasonably valued in terms of the Price/Sales (TTM) coming in at 10.39, with an industry average of 28.24. Besides being relatively cheap by this parameter, when examining the profitability of the company as measured by the Return on Equity (ROE), we can see that BLUD comes in at a ROE (TTM) of 33.48%, double the industry average of 16.80%.

Finishing up with Yahoo, we find that the company has 68.83 million shares outstanding with 67.98 million that float.  As of 3/12/07, there were 4.83 million shares out short, representing 7.1% of the float or 6.7 trading days of volume.  This is even higher than the prior month's short interest of 4.45 million.  This short ratio of almost a week and a half of average trading days is well ahead of my own cut-off of 3 days of short interest being significant.  With the terrific earnings report yesterday, one can almost hear the panic purchasing of the short-sellers today scrambling to cover their speculative sales.  O.K., I am just guessing, but seriously, with all of the great numbers on this company, who would want to be short?

No dividends are reported on Yahoo and the last stock split was the 3:2 split I mentioned earlier which was declared on May 16, 2006.

What does the chart look like?

If we examine the "Point & Figure" chart on Immucor (BLUD) from StockCharts.com, we can see what appears to be a very steady increase in stock price from $1.75/share in March, 2002, to the current level of $33.76, pushing near the high set in January, 2007, when the stock traded as high as $34.  The company appears to be trading strongly and I don't see any weakness in this chart from my own amateur perspective. 


Summary: What do I think?

Well, I certainly liked what I first read earlier today (and I read it a bit closer than my quick evaluation of AZZ yesterday), and I thought this was too good a match for my blog to not own some shares. It was an easy decision to trade out of my AZZ and into BLUD.  I hope it continues to do well.

The earnings report yesterday was solid.  Nobody is lowering guidance on this stock!  The company beat expectations on both earnings and revenue.  And their Morningstar.com report is almost perfect with steady revenue growth, almost perfect earnings growth, a slowly growing number of shares in the face of a rapid improvement in financial numbers, growing and solid free cash flow, and a very strong balance sheet.

On top of this, the Price/Sales is low relative to its group, the Return on Equity is high, and there are loads of shares out short ready to be 'squeezed'.  Valuation wise, the earnings are growing so fast that even with the rich p/e, the PEG is still under 1.0.  I like this stock a lot.  I didn't marry it lol, but I put it in my portfolio.

Thanks so much for stopping by and visiting!  If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.

Bob 


Posted by bobsadviceforstocks at 10:52 PM CDT | Post Comment | Permalink
Updated: Saturday, 7 April 2007 1:38 PM CDT

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