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Sunday, 8 July 2007
Bradley Pharmaceuticals (BDY) "Long-Term Review #7"

 

 

 

 

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 write entry after entry on this blog, sometimes I feel like my early entries have gotten buried under the pile of posts.  I do a 'weekend review' of stocks from a year or so ago, but what about the very early posts?  Whatever happened to them?  Or I hope you are asking that question.

I started this blog back on May 12, 2003.  Now, into my fifth year of blogging, I have 1,533 posts on this website.  Even I have problems finding entries.  One day I will have to develop a better search engine and index for my blog.  Meanwhile, if you ever want to find a post, just use Google (I do!).  Simply enter "Stock Picks Bob's Advice" along with the Stock name you are searching for.  That usually works.

Anyhow, sometime back I decided to dig back into the early entries and find out how things have worked out for the companies years later.  I have been trying to do this on weekends as a "Long-Term Review", but one thing always leads to another, and now I am only up to my entry #7 Brady Pharmaceuticals which I first posted on Stock Picks on May 19, 2003.  My last long-term review was for Genentech (DNA) which I had originally posted also on May 19, 2003, and re-reviewed on April 14, 2007.

I wrote about Bradley: 

"May 19, 2003
Bradley Pharmaceuticals (BDY)

As the market nears its close, with the Dow down about 170 points, it seems a strange time to pick stocks with positive momentum. But only the strongest are able to buck the tide.

Bradley Pharmaceuticals (BDY)as I write is trading at $15.77 up $1.02 or 6.92% on the day. This past quarter was reported on April 30, 2003, for the quarter ending March 31, 2003, sales totaled $14.9 million and increase of 60% over 2002. Net income was $1.2 million or an increase of 67% year over year....very nice numbers!

Looking for the 5 year numbers on Morningstar we find revenue of $16 million in 1998, $19 million in 1999, $19 million in 2000, $26 million in 2001, and $40 million in 2002. Extrapolating current sales would give us a $60 million rate for 2003 (!).

Prior to this recent quarter of a 60% sales increase, the prior four quarters in sequence showed a 75.90% (3/020, 57.93% (6/02), 48.84% (9/02), and 41.6% increase in sales (12/02).

The company is small with a tiny market cap of $154 million but is very reasonably priced with a p/e of about 17. Good luck investing and remember the 8% stops EVEN on recent purchases! Bob

P.S. I do not own any shares nor do any of my family members own shares in this company."

Let's take a closer look at Bradley and see how things turned out!

I shall explain why

BRADLEY PHARMACEUTICALS (BDY) IS RATED A HOLD 

 

 First of all, Bradley (BDY) closed at $21.52 on July 6, 2007, for a gain of $5.75 or 36.5% since posting.  I do not own any shares nor do I own any options on this stock.

What exactly does this company do?

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

"...engages in acquiring, developing, and marketing prescription and over-the-counter products. It offers various dermatologic and podiatric products, including ADOXA and ZODERM for acne; ROSULA AQUEOUS for rosacea and acne; ROSULA NS PADS for antibacterial treatment; KEROL REDI-CLOTHS and KERALAC for mild to severe dry skin; and KERALAC GEL and KERALAC NAILSTIK for mild to severe dry skin and nail disorders. The company also offers CARMOL for mild to severe dry skin, xerosis, nail disorders, and inflammatory skin conditions; VEREGEN for external genital or perianal warts; SOLARAZE for actinic keratoses and pre-cancerous skin lesions; LIDAMANTLE HC for topical anesthetic and anti-inflammatory; ACIDMANTLE, a cosmetic skin pH balancer; ZONALON for topical anesthetic; SELSEB and CARMOL SCALP LOTION for dandruff; and AFIRM and BETA-LIFT for office procedure for chemical peels."

How did they do in the latest quarter?

On May 10, 2007, Bradley reported 1st quarter 2007 results.

Net sales for the quarter ended March 31, 2007, came in at $37.8 million, up $3.0 million or 9% over the prior year same perid.  Net income for the quarter was $2.5 million or $.15/diluted share, up strongly from $.01/diluted share the prior year.  

Even though this was a relatively strong quarter, the company disappointed analysts who had estimated that earnings would come in at $.24/share. 

More recently, the company stock has been doing better after an investment group led by the CEO, Daniel Glassman, made a bit to take the company private.  Here is a review of that development by Motley Fool. 

How about longer-term results?

Reviewing the Morningstar.com "5-Yr Restated" financials on BDY, we can see that revenue growth has been steady with $40 million in revenue in 2002, increasing to $133 million in 2005 and $145 million in 2006.  Earnings have been erratic, increasing from $.67/share in 2002 to $1.35/share in 2003.  Since then they dropped to $.49/share in 2004, stayed at $.49/share in 2005, and increased to $.58/share in 2006.  The company has meanwhile increased outstanding shares from 10 million in 2002 to 16 million in 2006 and 17 million in the TTM.

Free cash flow has been nicely positive and improving with $16 million in 2004 increasing to $29 million in 2006.  The balance sheet is adequate with $46.7 million in cash and $41.7 million in other current assets.  This total of $88.4 million in total current assets, when divided by the current liabilities of $69.5 million yields a current ratio of 1.27.  Generally, from my perspective, current ratios of 1.25 or higher are nominally healthy.

What about some valuation numbers?

Reviewing the Yahoo "Key Statistics" on Bradley reveals this company to be a small cap stock with a market capitalization of only $363.1 million.  The trailing p/e is moderate at 29.85 with a forward p/e (fye 31-Dec-08) estimated at 19.74.  The PEG is also a bit rich at 1.79.

Reviewing the Fidelity.com eresearch website on BDY, we find that the Price/Sales (TTM) ratio shows a reasonable valuation for Bradley coming in at 2.41 with an industry average of 7.07.

However, the company is less profitable than average as evaluated by the  Return on Equity (TTM), Bradley is reported at 6.45% compared to an industry average of 26.93%.

Finishing up with Yahoo we can see that the company has 16.87 million shares outstanding with 13.08 million that float.  Currently, as of 6/12/07, there were 2.28 million shares out short representing 4.5 trading days of average volume (the short ratio).  This is 15.10% of the float and is a bit significant from my perspective as it is above the '3 day rule' that I have arbitrarily been using for significance of short interest.

No dividends are paid per Yahoo, and no stock split is reported.

What does the chart look like?

Looking at the "Point & Figure" chart on Bradley Pharmaceuticals from StockCharts.com, we can see that the stock peaked shortly after my "pick", climbing from the $15 level in May, 2003, to a high of $32 before dipping sharply back to a low of $8.00 in May, 2005.  Since then, the stock has been recovering nicely, currently at the $21.52 level.

Summary: What do I think about this stock?

I have rated this stock a "HOLD" because of the weakness in earnings the past several years.  The latest quarter did show significant improvement and is encouraging.  Also, the potential buy-out by the CEO and his investor group also adds interest to this as a stock investment.  However, even though revenue has been positive, earnings have disappointed.  The company has also used issuance of stock which is also hampering earnings growth. 

Valuation-wise, the Price/Sales looks good, but the ROE is a bit weak and the PEG suggests that the price also is a bit rich in terms of future earnings growth as estimated.  An interesting stock pick.  A stock which I would have sold if I had purchased it back in 2003 because of the subsequent stock dip in price; but a stock which is ahead significantly from the original pick price. 

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.  Be sure and visit my Stock Picks Bob's Advice Podcast Website, where you can listen to me discuss some of the stocks I write about here on the blog.  In addition, check out the Social Picks Website that tracks Stock Picks Bob's Advice and see what a third-party has to say about my performance the past six months!  If you are interested, for the past month I have been followed by Covestor and you can visit the Stock Picks Bob's Advice Covestor Website and see how my actual holdings in my Trading Portfolio have been working out for me!

Have a great weekend everyone!  Thanks once again for visiting and sharing your thoughts and ideas with me!

Bob

 


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