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Tuesday, 13 July 2004
July 13, 2004 Option Care (OPTN)

Hello friends! It is a beautiful Tuesday afternoon here in Wisconsin and the best I can do is to go online and post on my blog. Will definitely need to get into some sort of blog-support group....:). Please remember, as always, that I am an amateur investor myself, so I cannot be responsible for any trades that you make. So please consult with your investment advisors before taking any action based on information on this website.

I came across Option Care this afternoon, while scanning through the lists of greatest % gainers. I do NOT have any shares or options (no pun intended) of OPTN. As I write, OPTN is trading at $17.39/share, up $3.18 or 22.38% on the day. What drove this stock higher today was a report by the company this morning RAISING guidance for the 2004 2nd quarter of $.21/share earnings on $98 million in revenue. The "street" was looking for $.19/share for the quarter and $92 million in revenue. Investors clearly liked the news. In addition, OPTN raised 2004 year guidance to $.84-$.87/share vs a previous consensus of $.78.

According to the Yahoo "Profile", OPTN "...provides pharmacy services to patients with acute and chronic conditions at the patient's home or at other alternate-site settings such as physicians' offices."

OPTN announced 1st quarter 2004 results on May 4, 2004. For the quarter ended March 31, 2004, revenue came in at $103 million, an 11% increase of $93 million in revenue the prior year. Net income was up 8% to $4.3 million from $4.0 million the prior year, or $.20/diluted share vs. $.19/diluted share the prior year.

Looking longer-term at the "5-Yr Restated" financials from Morningstar.com, we can see a steady record of revenue growth from $120.4 million in 1999, to $355.4 million in 2003.

Earnings have been a bit inconsistent increasing from $.31/share in 1999 to $.67/share in 2002, and then dropping in 2003 to $.41 and now increasing to $.42/share in the TTM.

Free cash flow has recently performed quite well increasing from $(12) million in 2001, to $5 million in 2002, $23 million in 2003 and $24 million in the trailing twelve months (TTM).

The balance sheet, as reported on Morningstar.com, is also very healthy with $6.6 million in cash and $82.2 million in other current assets as opposed to $27.7 million in current liabilities and only $7.2 million in long-term liabilities.

What about valuation? If we check Yahoo "Key Statistics", we can see that this is a small cap firm with a market cap of $370.5 million. The trailing p/e is a bit rich at 41.13, but due to the rapid growth anticipated, OPTN carries a forward (fye 31-Dec-05) p/e of only 19.77. Thus the PEG looks great at 1.01, and the Price/Sales ratio is also quite nice at 0.83.

Yahoo reports 21.29 million shares outstanding with only 13.20 million of them that float. There ARE a few shares out short, 361,000 as of 6/7/04, which represents 3.8 trading days of volume. The company does pay a small dividend of $.08/share yielding 0.56%, and did declare a 5:4 split in May, 2002.

If we take a look at a recent Point & Figure chart from Stockcharts.com:




we can see that the stock which was trading sideways between at least August, 2001 and September, 2002, actually broke down and hit about $6/share in September, 2003, and since that time has been trading steadily higher above its support line, and recently has broken out on the upside. I am NOT a technician, so please judge the graph yourself. The stock looks strong...although the most recent move may leave it a bit extended.

So what do I think? I like this stock. Of course personally, I do NOT have any cash to invest in my trading portfolio (I am waiting to sell a portion at a gain before adding ANOTHER position). However, the recent news with upwards guidance for the current quarter and year is quite bullish for the company. The recent earnings report is nice if not brilliant, the 5-yr results look good. The free cash flow is excellent, as is the balance sheet. The valuation is nice with a PEG about 1.01, and a Price/Sales under 1.0. Quite frankly, I haven't found much about this one that I do not like!

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

Bob


Posted by bobsadviceforstocks at 1:18 PM CDT | Post Comment | Permalink

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