More from the Healing Front
09/22/2006 12:00 am EST
Focusing on stocks with rapid growth that Wall Street has not yet fully discovered, Ian Wyatt looks to the East for this company that is turning in double-digit growth in the wildly-opportunistic investment climate of China.
"We are adding shares of China Medical Technologies (CMED NASDAQ) to the Growth Report portfolio.It is our policy to buy stocks at the latest ask price. As of 9:35 am EST this morning, China Medical Technologies' ask price was $20.69. China Medical Technologies is a Beijing, China, based firm that develops, manufactures, and markets products used in the treatment of solid cancers and benign tumors. The company's business is conducted primarily in China.
"The firm's primary product is an ultrasound therapy system used for the noninvasive treatment of solid tumors in the liver, breast, kidney, the pelvic cavity, on bones, and in the limbs or superficial tissues. China Medical's other key product is a "chemiluminescence (ECLIA) system, which is an integrated luminescence immunoassay in-vitro diagnostics system. It offers approximately 27 types of reagents [a substance that is used in analysis and synthesis because of the reactions it causes] for use with the ECLIA analyzer to detect thyroid disorders; diabetes; disorders relating to reproduction and growth; and various types of tumors."
"The company's revenues increased 48% to $11.4 million in the fiscal first quarter ended June 30, 2006, from $7.7 million in the year ago quarter. For the fiscal year ended March 31, 2006, revenues increased 70.1% to $46.4 million from $27.1 million in the previous year. Net income in the first quarter was $5.7 million or $0.21 per diluted ADS versus $3.8 million or $0.15 per diluted ADS in the year ago quarter, an increase of 86%. China Medical's cash flow provided by operating activities for the year ended March 31st was $22 million, compared to $18.1 million in the previous year.
"The consensus analyst estimates call for earnings of $1.16 on revenues of $66.4 million in fiscal 2007, ending March 30, 2007. For fiscal year 2008, the consensus calls for earnings of $1.54 on revenues of $87.8 million. At a price of $20.69, China Medical Technologies' shares trade at 18X current year earnings and 13X fiscal 2008 earnings. Given the firm's impressive growth and high level of profitability, we feel an entry at current price levels presents the investor with great upside potential.
"We have performed in-depth due diligence on China Medial Technologies and will be releasing our complete report in the coming weeks."