Bob,
Here's an interesting article in BusinessWeek that leads me to believe Quidel could easily sell for a 40 to 60 P/E in a few years, and drive Quidel's stock up well over $20 per share:
"THE MUSCLE IS IN THE RUSSELL"
Small caps could beat the S&P 500 for the first time since 1993
businessweek.com
Small is big on Wall Street these days. After more than a year of languishing while investors were captivated by the blue chips, the stocks of small companies are finally leading the way. . . . . .
. . . . . The newfound affection for smaller companies is built on sturdy fundamentals: higher forecasted earnings and lower price-earnings ratios. The estimated earnings growth for the next 12 months is 23% for the Russell 2000 companies vs. 14.7% for the S&P 500, according to First Call Corp. The p-e ratio based on expected earnings for the small caps is 12 (doesn't look like the market's overvalued to me), vs. 18 for the S&P 500. . . . .
. . . . small stocks started to soar as soon as the President and Congress reached a deal on the capital-gains tax. . . .
. . . . "Since the beginning of the year, a number of critical indicators have suggested small caps were undervalued (based on projected earnings Quidel is undervalued), but that didn't seem to make any difference (one possible reason Quidel's price remained low). . . . ."
. . . . For sure, the investors will be hearing a lot more about the Russell 2000 in coming months (expect the price of undervalued stocks like Quidel will increase). . . . .
. . . . As the small-cap stocks gained strength in recent weeks, money has started to roll in. "Fund investors are clearly rotating from large-cap to small, . . . ."
It wasn't mentioned in the article, but I think the shift of money from the large-caps to the small-caps will not be short lived, because many investors won't sell for 18 months (previously 12 months) in order to take advantage of the lower long term gains rate. If this happens, lot of the money flowing into the small-cap sector will remain there for 18 months or more, keeping prices high. Many investors who had big gains in big-cap were waiting for the gains tax cut before selling. After selling their big-caps, many will want to stay invested. As word spreads that small-caps are now the place the invest, the small cap P/Es will soar, and many investors won't sell for at least 18 months.
It sure looks like the market's right for Quidel, and with some good earnings news, it's going climb, and maybe higher than may believe it could.
Mike |
