Dale, re. HPRT, thanks for the link on the story about HPRT and competitor.
re. the $4 per share of cash, yes, liquidity is not HPRT's problem right now.
The cash is largely offset by LT debt, so that the book value is only $1.16. And as you noted, rev. per share is $1.19.
The play for me is not a liquidity crisis, as it often is for broken stocks, but rather a combination of
(1) high valuation
(2) lack of future for the product
(3) low RS.
here are the details:
(1) The valuation
This depends on your perspective. When you look at the price-to-cash ratio of about 1.3, you might conclude it's really cheap. However, I look at p/b = 5.6 and PSR = 5.5 for a co. that has seemingly no prospect of becoming profitable, and I find an overvalued stock.
Comparative valuation might also be useful. In the story you cited, it compared HPRT to peer CTSI:
In the first quarter, 1,150 Heartport procedures were done worldwide, down from 1,232 in the the fourth quarter ...
More than 3,000 CardioThoracic procedures were done in the first quarter of 1998, up from 2,700 in the prior quarter
Yet HPRT has an enteriprise value (market cap + LT debt - cash) of $150 M market cap vs.
(2) product acceptance
HPRT's revenues are declining, indicating physicians aren't accepting the product. they don't have any other product, and they are losing money at their present level of revenues, it seems they have no future.
(3) the low RS is just a technical matter that makes it less probable that the stock will go up. |
