I just don't see anything negative on the horizon...
Okay...except the movement in the stock price.
Well, it is nearing the end of the year and I am trying to figure out why CTAL is down 40% as the Nasdaq is up 60%.
Price = 10 3/4
Market Cap = 688 million
Revs likely to be over $400 million for the year.
Earnings for the year likely to be $0.35.
Given CTAL's consistent record, excluding one-time 3rd quarter problems, would likely have been $ 0.45, giving a net of $ 28.8 million and a trailing P-E = 24
For the first 9 mos of 1999, CCSI lost about $ 5 million, so say CCSI loses $6 million for the year. At this year's tax rate of 18% we are currently "not seeing" $4.92 million in profits from the pharm side of the business. In other words, if CCSI did not exist at all, then this year the pharm side, which currently accounts for all the profits, would be showing an additional profit of $4.92 million, or about $0.077 a share. That would give an effective net of $ 33.7 million and a P-E = 21 if the company were pharm only. Even at next year's 38% tax rate, current pharm net profit would be $ 25.5 million, or $0.39 a share. With more products coming on line (Synercid and others) and Glaxo continuing to extend their agreements, I would expect this number to grow somewhat.
For comparison, Chirex,one of CTAL's competitors has a current market cap of $ 529 million on likely year-end revenues of $ 150 million and net of $ 17 million. Chirex also bought a plant from Glaxo in 1997, albeit a much smaller one. The primary product there was Zantac, which by the way, Glaxo is moving to CTAL's Greenville facility.
Then you have Xonon. Does Xonon detract from CTAL's overall value? If anything we have heard about Xonon is true, then this statement is absurd. If this were a stand-alone company it would certainly have some positive value, although hard to put an actual value on it until some more specifics are known.
Considering CTAL has done such a good job of guiding analysts' estimates in the past, and the fact that next year's estimates are converging to about $ 0.51 a share, I think this number is achievable in management's estimation, even with the higher tax rate next year. I will bet that CCSI will still be a drag on earnings next year, which means pharm has to pull in all these profits itself. By my back of the envelope calculations, profit growth within pharm must be over 30% to achieve these numbers. If that's true, and with some premium for the future value for Xonon, this company is a screaming buy at these levels.
What will it take to realize this value in the stock price? A Xonon announcement would be nice; at least to clear up the confusion around that business segment and to add some tangible flare to the company. I guess I will just have to wait and load up more when it hits $ 8...and even more at $4.
;-)
Erik |
