Omnicell: Dispensing Profits

02/13/2014 7:00 am EST

Focus: STOCKS

Leo Fasciocco

Investment Columnist and Publisher, Ticker Tape Digest

Our latest featured breakout recommendation is a company that provides automated systems for healthcare firms to dispense medication, explains Leo Fasciocco, editor of Ticker Tape Digest.

Omnicell (OMCL) is organized into two operating business segments: Acute Care, which primarily includes sold to hospitals, and non-acute care, for customers outside of hospitals.

About 2,700 hospitals and 6,000 institutional and retail pharmacies use the company's products and services.

Annual revenues are $365 million. The company reported that earnings for the fiscal second quarter ending in December rose to 19 cents a share from 16 cents a year ago.

Going out to 2014, the Street is looking for a 21% increase in net. The stock sells with a price earnings ratio of 29. Profits for the first quarter should leap 60% to 16 cents a share, from 10 cents a year ago.

The stock came public in 2001 trading around $8, and eventually worked its way to an all-time high of $31.12 in 2007, the peak in the prior bull market.

The stock then fell back to $6 during the following bear market in 2009. However, since then, OMCL has recovered and is now in position to challenge its all-time high.

Over the past 12 months, the stock has appreciated 58%, versus an 18% gain for the S&P 500 index (SPX).

The stock has now broken out from a seven-week flat base. It gapped higher and out of its flat base. The move comes with a widening of the spread (range from low to high) and an expansion in volume. That is bullish.

The move carries the stock to a six-year high. We are targeting OMCL for a move to $34 off this breakout. A protective stop can be placed near $24.50.

Institutional sponsorship is excellent. The largest fund buyer recently was 5-star rated Buffalo Emerging Opportunities Fund, which purchased 155,300 shares. The largest fund holder is Pioneer Oak Ridge Small-Cap Growth Fund with a 4.2% stake.

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