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Biotech / Medical : Prime Medical Systems, Inc.(PMSI)
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To: Paul Viapiano who wrote (186)10/28/1997 6:08:00 PM
From: l. niedzwiecki  Read Replies (1) of 210
 
In the past, sales grew year-over-year at a faster pace due to acquisitions. If you look at the increases in "same-store-sales", or the sales increases of the existing business, before acquisitions, the growth rate is somewhere around 5%. Now I have not yet veryfied this, but I think the last major acquisition was made prior to the 96 3Q, so last years (96) 3Q sales were a lot higher than 95 3Q sales. However, there have not been any major acquisitions(Lithotripters Inc. magnitude) between this year and last year. Therefore, 3Q year-over-year sales increasesd 9% while 9 month sales increased 40% because of where the acquisitions fell. This has happened because PMSI has slowed its pace of lithotripter aquisitions during the last 9 months due to the start-up of the Prostatron services. Sales of the 4Q year-over-year should again show a large increase due to the AK Associates acquisition and some Prostatron and physician management revenue.

It is also important to note that the pre-tax profit margin is at 24.5% compared to 19.8% in 3Q of '96. We are now seeing the operating efficiencies PMSI had anticipated earlier this year. If PMSI can hold margins at this level with the new businesses beginning to generate revenue, we could be in for a treat.

IMHO, this stock is very under-valued. It presents an outstanding opportunity for anybody who takes the time to discover the pre-tax growth rate and the increased tax rate that hides it. PMSI is truely a diamond in the rough.

Niedz

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