CANDELA CORPORATION (NASDAQ:CLZR)
INVESTMENT ANALYSIS SUMMARY
At the beginning of this year The Napeague Letter began following
Candela Corporation (NASDAQ:CLZR), which designs, manufactures, markets
and services lasers and cryogenic devices for a variety of surgical
applications in dermatology, urology and oncology.
After several years of marginal profitability due to heavy R&D expenses,
Candela is now experiencing sales and profit growth as the result of
several recently introduced products, as shown by the following chart:
Second Quarter First Half ----- Fiscal Year -----
1997 1996 1997 1996 1996 1995 1994
------- ------- ------- -------- ------- ------- -------
Revenues 9,406 7,885 17,045 13,869 30,413 28,243 29,820
Gross Profit 4,656 3,623 8,410 6,017 13,580 12,376 13,756
Net Income 736 461 1,245 356 1,245 ( 1,536) 655
Net Income/Sh 0.13 0.08 0.22 0.06 0.22 ( 0.29) 0.13
Gross Margin 49% 46% 49% 43% 45% 44% 46%
Net Margin 8% 6% 7% 3% 4% ( 5%) 2%
A good indicator of the strength of this growth is the fact that the
$1,245,000 of net income earned during the first six months of fiscal
1997 is equal to the net income for the entire prior fiscal year.
This growth is expected to continue for the next several years. The
recent increased acceptance of cryogenic prostate surgery is expected to
increase sales for Candela's already widely accepted cryogenic surgical
tools. And additional new laser surgical products will be introduced
later this year.
Based on relatively conservative assumptions, I am increasing my
projections for fiscal 1997 and now estimating that Candela will
generate revenues of around $36 million and net income approaching $2.4
million, with earnings per share of $0.42. This is a 18% increase in
revenue and a rather surprising 87% increase in earnings per share
versus the prior year.
At its closing price of $7.125 on Tuesday, March 11th, the Company is
substantially undervalued, and can justify a market price between $10.50
and $11.50 per share.
Although the Company is not currently followed by any sell-side
securities analysts, it has an adequate number of market-makers, and a
significant and seemingly stable institutional following.
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