Okay, I'll give it a shot. The earnings of BIOI appear to have stagnated & several investors have lost confidence in management. The last eight quarters earnings sequentially are $.07,.06,.09,.09,.10,.09,.10,.09/share. The estimates for FY97 have been falling from $.57 at the middle of FY96 to the current of $.46, which may still be optimistic.
The problems started around May 96 when they did a secondary of about 2.5M shares at $9.25/share. When the offering was subscribed to it was under market price. This offering was primarily done to get cash for the purchase of a Belgium company which has since been incorporated into Biosource Europe. The company was supposed to be immediately additive to earnings, but has turned out to be at least a temporary drain. Also BIOI took a hit due to currency fluctuations recently, which didn't sit very well. With their new expanded European presence, I felt increasingly vulnerable to these problems in the future.
Biosource's primary business is suppling test kits to pharmacological & medical reasearch companies & organizations. They are not a typical Biotech type corporation so their multiples won't be what you normally expect from a Biotech Corporation. The only very similar company I can recall off-hand is Endogen, who is currently trading at a trailing P/E of 13.8. They do not have the potential of other Biotechs to potential cure cancer and make a gazillion dollars on their new drug. There are good and bad points to this but based on their current earnings they are probably fairly valued.
If the analysts turn out to be correct then obviously BIOI is undervalued. But for the last year the break through in earnings seems perpetually 3-6 months away. I held BIOI from Jan. 96 till fairly recently and will probably not own the stock again until either the price is lower or there is some evidence that earnings are going to start moving in the right direction. The momentum on the stock is still in the wrong direction and I haven't really heard anything from the company that's made me feel better about them. The cash position of the company is a plus, but the bulk of that is left over from a secondary offering which started a sequence of events, which may in retrospect, have been better not to have pursued.
All of the above is just my opinion & I've been wrong before. Good luck to all. |
