LCA-Vision: An Eye on Growth

11/18/2005 12:00 am EST

Focus:

Michael Burnick

Editor, Real Wealth Report

Elite Stock Trader, published by Weiss Research, is a specialized trading service for sophisticated investors. Editor and chief financial analyst, Mike Burnick, eyes LCA-Vision, a vision correction company that has "set its sights on robust growth."

"According to The Stock Trader's Almanac, November and December are tied for the best average monthly performance for the S&P 500, up 1.7% apiece. And January has typically been up about 1.5% since 1950. And for the NASDAQ, it's really a happy holiday season- with historic average gains of 1.9%, 2.1%, and 3.9% respectively.

"All told, that's a combined 5% average gain for the S&P (and 8%+ for the NASDAQ) in just three months. Compare that to a gain of only 1.6%, on average, from May through October. This pattern doesn't repeat every year, but the odds over time work powerfully in favor of the bulls.

"One stock that looks well-positioned to zoom much higher is LCA-Vision (LCAV NASDAQ). The company operates 49 laser vision correction centers under the name LasikPlus. Its locations are found mostly in large metropolitan markets throughout the US. The firm is one of the first providers of Lasik vision correction in the US. So it boasts leading edge technology and its doctors are among the foremost experts in the business. It has performed more than 500,000 laser vision procedures and, as Americans get older, its business should keep booming.

"Already, LCA-Vision has built a crystal clear track record of red-hot sales and profit growth, and its future earnings potential is enormous. The company just reported that its third-quarter sales jumped 50% year-over-year to $47 million from $31 million in the same period last year. That's on top of sales growth of 58% and 53% in the first and second quarters of 2005, respectively.

"Bottom-line net income surged 121% to nearly $8 million last quarter, compared to only $3.6 million in the year-ago period. And cash flow from operations jumped a mammoth 148% to $14.4 million. Over the past five quarters, LCA's cash flow from operations consistently exceeded its accounting net income- often by a factor 1.5 or 2 to 1. That's a very strong and growing cash flow trend, and it tells me that LCA is performing even better than its bottom-line earnings suggest.

"The company's  return on shareholders equity is a whopping 33.6%; the industry average is barely half as much. LCA -Vision has also grown its cash flow from operations at a rate of 36.6% annually over the past five years. The industry has averaged just 10.8% cash flow growth. LCA Vision is also a cash cow. It has more than $109.6 million in cash on the balance sheet and almost no debt to speak of. That's $5.31 in cold, hard cash for each share of stock outstanding."

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