Don't know if we will ever see 30x here if the revenues don't grow faster and if European sales/operations don't improve. A PE of 20 would be fair IMO, assuming they grow earnings or revenues in that vicinity.
Here's the unedited write up on the conference call:
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BIOSOURCE INTERNATIONAL (BIOI)
BIOI announced second quarter results on July 16th, earning ten cents a share which was one cent short of analyst estimates. For the first six months the company has earned $0.19. In the last 14 months the company has repurchsed 1.1 million shares, 13(?) % of those outstanding, and has essentially completed its repurchase program. During the last quarter 450,000 shares were repurchased at an average price of $6.74, and during the first half 833,000 shares were repurchsed at an average price of $6.69. Currently their are 7.34 million shares outstanding.
Revenues only increased 5% over last years levels, although the U.S. sales were up 15% from year earlier levels. Management expects double digit growth in sales for the rest of the year, and may look at hedging opportunities to reduce the impact of currency fluctuations (half the company sales are in Europe). Revenues in Europe were not helped by the strength of the dollar, and excess manufacturing capacity exists in the European operations which makes costs higher than ideal.
The company introduced over 40 new products in the first half, and expects to introduce more in the second half. Two new products have significant potential in management's view - with a combined market of $13-16 million in which BIOI expects to be extremely competitive. BIOI's products are not unique technology wise but are packaged differently, and they offer a wide breadth of products at competitive prices and expect to gain market share.
The company has looked at acquisitions but found none that would be acceptable on value or fit, but recognizes that such acquisitions are needed to grow shareholder values.
Finanically the company retains strong cash flows and has a conservative balance sheet. With regard to Europe, the company looks to rationalize capacity between the U.S. and European facilities better utilizing the capacity, and is looking at cost reduction or efficiency measures.
The company would not comment on a future buyback, and said that the full weight of the buyback will be felt in the 1999 fiscal year.
Recently competitor Techne acquired Genzyme - so the company now faces one competitor in many areas where they faced two before. Management stated that Techne paid a significant price for what they got - most of what was bought the acquiring company already had - and what they did was buy market share. Techne is selling at a PE multiple of 26-28 and as earnings are diluted with the acquisition investor optimistim may fade for this business arrangement. (need to research what went on here - what the deal was, make sure I got the company names and divisions correct, and the terms).
On the other hand, if BIOI's competitors are sporting a multiple of this magnitude while BIOI sports a PE of 15(?) the market may be indicating that BIOI is undervalued.
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Again, unedited and still in rough draft form
Joe |
