I'm happy!!!
Quidel's 2Q98 report indicates to me all's well, and the company's on track.
I base this "all's well" feeling on a comparison of Quidel's actual results with what Jeffrey Holmes of Cleary Gull forecast in his 2 April 1997 report on Quidel. Here's some of what I see:
Quidel reported a 26% sales increase, but remember this includes $773 of backorders from 1Q98. Back in April 1997, Jeffrey forecast Quidel's 2Q98 net sales would be $10,242. If we take Quidel's 2Q98A of $11,254 and subtract the $773 1Q98 carryover, we get an adjusted 2Q98A of $10,481, which still exceeds Jeffrey's $10,242 forecast and is still a very respectable 18% sales increase. So, Quidel's 2Q net sales beat at least one analyst's forecast, and it looks like Quidel's performance lends credibility to Jeffrey's research.
Well, if we think Jeffrey's done his homework and agree with his most recent forecast, the one he made in his 8 July 1997 update on Quidel, then Quidel should be at least a $10 stock in my opinion. In July 1997, Jeffrey forecast Quidel would report a $0.36 EPS for FY99. If we value Quidel at a 30 P/E times its forecast earnings one year out, then at the end of Quidel's 4Q ending 31 March 1998, Quidel would be valued at 30 P/E X $0.36 or $10.80.
And remember, this forecast is based on honest to goodness FDA approved products already on the market. And we all know Quidel's working on some products yet to be introduced. They've certainly got some speculative value that doesn't appear to me to be factored into Quidel's price.
Here's something else I find very encouraging: Glaxo and Quidel recently announced another agreement whereby Glaxo will fund the R&D for a Herpes test to complement Glaxo's Herpes treatment. In October 1996, Glaxo and Quidel did the same for a flu test. Well, if Glaxo wasn't happy with the progress Quidel's been making on the flu test, I doubt it would foot the R&D bill for a herpes test. This suggests to me Quidel's progress on the flu test is going well. And recent reports indicate Glaxo will submit its flu treatment drug to the FDA in 1998. What's the speculative value of the first clinically viable flue test and treatment? It could be big, and I don't see it in Quidel's stock price. Just wait till some announcements are made concerning Glaxo and Quidel submitting their products to the FDA. The speculation will begin. And 1998 is not too far off.
Also, it appears Quidel's costs are in check. I'm not at all worried that Quidel's expenses increased due to hiring of new senior scientists and FDA 510(K) filings for new pregnancy products. Quidel's actual expenses for the following appear very close to Jeffrey's 2 April 1997 forecast, that didn't include the BD royalty payments:
Sales and Marketing: Jeffrey's forecast: $2,560; Quidel's actual: $2,469.
General and Administrative: Jeffrey's forecast - $973; Quidel's actual (less the $196 personnel costs not expected to continue) $1,037.
Quidel's stock still satisfies my personal risk to reward ratio, since Quidel's downside risks sure don't look too big to me and the up side potential over the next four years appears very, very good.
Mike |
