Hi Steve. Welcome to the OREX thread. I'm running tight on time today but will try to respond to your question. Depending on your risk-tolerance and time horizon, I believe that OREX will provide above average price appreciation in 1997-98. However, such an investment typically also carries comparable (above average) risks.
Here goes my opinions- on the plus side:
Price to book value is ~1.5;
Well-capitalized, small growth co. positioned well for turn around in earnings. I'm a firm believer in earnings (and related growth) as one of and probably the MOST important fundamental. If eps ~$.20 in 1997, p/e multiple is not unreasonably high at 35x. Don't know 1998 projections yet, but eps growth could double. Should that happen, stock price could triple from here.
Patent protected technology on the waste disposal process;
Outstanding customer testimonials regarding significant returns on their investment (i.e. their reoccurring reductions in waste disposal expense - I've seen numbers ~>$30K per year per hospital). Today, it's my understanding that OREX products are competitively priced which means that with growing market share, Isolyzer could participate in Customer savings with some premium pricing.
Relatively thin float of ~25-30 million shares could be a real plus if institutional ownership should double from <20-25% today to perhaps double that with an earnings turn-around accompanied by significant double-digit eps growth (or simply the perception of such growth).
ISO 9002 certification opening up more EC markets;
Mfg capacity now (1997) at 10x comparable capacity in 1995;
Relatively low debt; good working capital;
Significant management ownership with recent "vote of confidence" shown by top management insider buying;
With realization of earnings and market share growth, possibility of consolidation (i.e. acquisition) by a bigger player;
I consider TA after I believe in fundamentsls: Trading at bottom of trading range (good support level) with potential up turn in earnings; minimal downside risks;
Other industrial, waste-disposal-intensive markets open up (such as
theme parks (e.g. Disney); adult diapers for incontinent people in nursing homes, etc.)
In my opinion, fewer negatives than positives:
eps disappointment could (and probably would) drive market value lower;
competitive product pricing becomes more fierce;
sales and marketing ramp up takes longer than expected;
the usual time value of investment (always possible, opportunity costs associated with perhaps better investment alternatives)
Other unexpected negatives; losing market share; patent or other trade secret threats; etc.
Steve, the above should not be taken as investment advice but perhaps used in your further due diligence on Isolyzer. I run several investment portfolios and OREX is the type of comparatively higher-risk investment that fits in respective apportionments. I have been very active in the markets for over 30 years and my average holding period is usually intermediate to long-term with occasional hedging techniques of covered opposite options or shorting against the box. I haven't written covered calls on OREX yet, but as others have pointed out on this thread, such a tactic can be rewarding but is certainly not without its associated risks of quicker than anticipated appreciation. I certainly could be wrong (and have scars to prove it), but my strategy in this scenario is to consider writing some covered calls (in or out of the money depending)if and when OREX is $8.5-$9/share as a means of perhaps enhancing returns. Sometimes I trade the options if volatility lends itself to that opportunity.
Hope this makes some sense; don't have time to edit today. Regards-Kent |
