Steve: Thanks for the invitation - I may just join you over at the QDEL thread.
A couple of responses to your comments:
1. Triby's Total Operating Expenses as a percentage of Sales were:
1994 - 64%
1995 - 38%
1996 (first 3Q) - 41%
Since QDEL's fiscal year ends in March, these compare to QDEL's FYs:
1995 - 61%
1996 - 52%
1997 (first 2Q) - 53%.
Triby has successfully managed costs, even given this years' decline in
revenues. I think some of the difference between the two companies is
attributable to Quidel's aggressive sales and marketing which, as you said,
may pay off in the long run in their ability to earn some name-brand profits.
My point was that this is somewhat of a risky venture and that it is
currently eating into their profits.
2. As of the close on Wednesday, QDEL's market cap was $83 million, not
$101 million; Triby's market cap was $38 million, not $8 million.
3. I don't think it's logical at all for expenses to be proportional
to market cap. One of the keys to profitability is to grow revenues at
a faster rate than expenses, so that the proportion goes down over time.
As you noted in your post, QDEL's percentage of Tot. Op. Exp. to Sales
has gone from 44% in 1992, to 61% in 1995, and to 52% in 1996. The fact
that this percentage has actually risen over time should be of some
concern to QDEL shareholders.
4. Triby has an H. Pylori test in R&D - the company recently said it would
be submitted to the FDA in early 1997 (I know, promises promises).
5. I agree that some companies are able to earn premium, name-brand profits.
However, companies like Quidel and Trinity have to spend enormous amounts
of money to gain this kind of recognition. This is costly, especially when
these costs are spread over a relatively small product line. Also, cost
containment in the medical industry may reduce or completely eliminate
some name-brand profits and reward low-cost producers.
6. I don't think QDEL and Triby are as different as apples and oranges. I
think the difference is in maturity - QDEL has several tests under their
belt and fairly significant revenues; TRIBY is just now bringing several
tests to market.
Here's some comparative valuation numbers for rapid diagnostic companies
based on the past four quarters:
Epitope Salv Quidel Triby
Revenues $6,200,000 $605,591 $37,553,000 $7,571,000
Net Profit/Loss ($1,400,000) ($5,931,211) $956,000 ($371,000)
Shares 13,250,000 21,935,785 22,476,000 15,137,792
EPS ($0.11) ($0.27) $0.04 ($0.02)
Closing $11.63 $1.56 $3.69 $2.50
Market Cap $154,031,250 $34,274,664 $82,880,250 $37,844,480
Price/Sales 25 57 2 5
Book Value $2.11 $0.13 $1.17 $0.77
Price/Book Value 5.51 12.03 3.14 3.25
Cash Equivalents $7,908,271 $1,780,453 $2,432,000 $7,998,478
CA/CL 14.52 3.03 3.83 26.27
ROE -0.91% -17.30% 1.15% -0.98%
WC/MC 17.46% 4.52% 12.16% 24.21%
CA = current assets; CL = current liabilities
ROE = return on equity
WC = working capital; MC = market cap
Sorry for the formatting problems - any tips on how to format tables
on SI? |
