September 5, 2010

Healthcare Stock Vision Sciences VSCI

VSCI is a healthcare company that makes endoscopes for medical and industrial uses. VSCI has a market cap right now of $48 million. The balance sheet isn't as deep value as I usually look at but it is good.

Balance Sheet
Looking at the balance sheet we have current assets of 8,806 - inventory of 3,915 = $4.89 million.

$4.891 mil / $2.720 million in current liabilities = healthy quick ratio of 1.79

Also, there is $3.5 million in net tangible assets. The balance sheet looked good enough to me.

Income Statement
They had good sales growth year over year in 2009. Fiscal 2010 looks like negative sales growth. This first quarter of their fiscal 2011 revenue was down 21%. Urology and bronchoscopy sales were both up and ear nose and throat sales and repairs etc. (guessing that is industrial segment) were down.

More from the first quarter they just reported
  • ENT and TNE sales decreased 63% to $0.4 million from $1.2 million
  • Urology sales increased 28% to $0.9 million from $0.7 million
  • Bronchoscopy sales increased 113% to $0.4 million from $0.2 million and
  • Repairs, peripherals, and accessories sales decreased 33% to $0.3 million from $0.5 million,

It looks like they haven't been profitable on the bottom line annually for atleast a couple years. Looks like there was positive EPS of $.57 in 2007 annually(2008 fiscal?).

Some Thoughts
It looks like this healthcare companies biggest problems have been gross margins. Morningstar shows a 37% gross profit margin in 2004 and it's just been slowly declining since.

The old CEO resigned in November of 2009 and was replaced with an interim CEO who was on the board since 2005. I'm not sure if this has changed as of late right now though.

Ownership
The interim CEO Warren Bielke has bought 300,000 shares of stock just this year. Some $320,000 worth.

Morningstar says American Funds Smallcap World 529A has a 3.3% stake.

More Observations
The stock price went from $1.50 in late '07 to $6 in early '08.

The conference call for Q1 2011 was on August 12th. Interestingly the stock ran 28% after the conference call on the 12th through late August. I haven't read the transcript of that call yet. I didn't see it on Seeking Alpha. The audio looks to be here. The thing is though the call may not have actually been significant as far as the way the stock traded. It might just be correlation without causation. I would like to know if they have any guidance on revenue or earnings though.

One thing that stands out is the stock traded 590,000 shares on July 23rd and a whopping 1,109,200 shares July 26th! The stock has three month average trading volume of only 68,000. That was some unusually heavy volume. I believe that the last time the stock traded over 1 million shares intraday was in September of 2007.

















full disclosure: no position but I have it on my watchlist

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