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Friday, 26 March 2004
March 26, 2004 National Med Health Card Sys (NMHC)
Hello Friends! Thanks so much for stopping by. I have started my "housework" on the blog for the week and have now updated my Website as well...the prices listed on past picks are a little more recent now. As always, do your homework on all of the stocks mentioned on this blog and make use of your own investment advisors to know if investments discussed are appropriate or timely for you!

National Medical Health Card System (NMHC) came up on the list of top NASDAQ gainers. As I write, NMH is trading at $25.06, up $1.89 or 8.16% on the day. According to the Profile for NMHC on Yahoo finance, NMHC "...provides pharmacy benefit management (PBM) services under the name NMHCRX through its network of licensed pharmacies throughout the United States."

On February 2, 2004, NMHC reported Second Quarter 2004 results. Revenue for the 2004 second quarter was $163.9 million, compared to revenue of $151.0 million for the same period the prior year. Net income for the 2004 fiscal quarter increased 35.4% to $2.2 million or $.25/diluted share vs. $1.6 million or $.20/diluted share the same period last year.

If we check the "5-Yr Restated" financials on Morningstar.com we can see that revenue has been growing steadily from $128.3 million in 1999, to $573.3 million in 2003 and $576.7 million in the trailing twelve months. Earnings have grown steadily from 2001 when they were $.16/share, increasing to $.82/share in the trailing twelve months. Free cash flow has also been improving nicely, increasing from $8 million in 2001 the $20 million in the trailing twelve months.

One of my concerns with this data is the balance sheet. NMHC has $4.9 million in cash and $89.2 million in other current assets, but also has $128.8 million in current liabilities that need to be paid ASAP. Their long-term debt is low at $4.4 million.

It is interesting to see these balance sheet and anticipate financial issues that need to be dealt with. The latest piece of news on NMHC is a story about the placement of $80 million in convertible preferred stock with "New Mountain Partners, L.P.". This should take care of any liquidity problems and I believe with the growing free cash flow, NMHC shouldn't be having additional problems unless their business results should deteriorate.

How is NMHC 'valued'? Let's take a look at "Key Statistics" from Yahoo.com on NMHC. The Market Cap is a small $199.36 million. The trailing p/e is reasonable at 28.87, the forward p/e is 24.78 (fye 30-Jun-05). No PEG is reported (for anticipated 5-yr growth) probably because no analysts have estimates that far out! The company does sell at a reasonable 0.31 for price/sales.

Yahoo reports 7.96 million shares outstanding with 4.30 million of them that float. I do not own ANY shares of this stock. As of 3/8/04, there are 125,000 shares out short representing 2.91% of the float or 1.923 trading days. No dividend is paid and no stock splits are reported.

Checking a "Point and Figure" chart from Stockcharts.com, we can see that the stock broke through its last resistance level in February, 2003, at about $9.0 and has headed higher steadily over the last year.

Overall I like this stock. I like the industry they are in...pharmacy management, the revenue growth, the earnings growth, the expanding free cash flow, the reasonable p/e. I didn't like all of those current liabilities...but management took care of that with a sale of a convertible issue.
Of course, I do not have any cash to buy anything (LOL) and will not be buying anything if I have any self control...until I sell a portion at a gain! Same old story.

Thanks again for stopping by! If you have any comments, questions, or words of encouragement, please feel free to email me at bobsadviceforstocks@lycos.com

Bob


Posted by bobsadviceforstocks at 1:05 PM CST | Post Comment | Permalink

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