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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Michael Burry who wrote (6651)	4/9/1999 5:07:00 PM
From: TwoBear	Read Replies (5) \| Respond to of 78592

I haven't contributed much to this board, but I sure have taken a lot, so I figured that I would try to throw something out there when I finally come across one. The reason I came across this stock is because I work in the field of Radiation Oncology in which they now solely participate. Now, I'm sure someone will find fault with some of my research, but hey, that's what everyone is here for. First of all I'll let everyone know that this is health care equipment company. Capital equipment. But let me get to the valuation before you move next to the next post. The company is Varian Medical (VAR). Just this week split from the parent company which split into three separate companies. Varian Medical kept the stock symbol, so it is misleading to look at the charts with that symbol. This company produces Linear Accelerators and the associated peripherals such as Simulators, Mulit-leaf collimators, brachytherapy equipment, and information systems. They ARE the market leader in the field. I would conservatively estimate that they own 70% of the market. The main competitor is the medical division of Siemens. Siemens has just in the last three years begin reselling Linacs due to FDA shutting them down for approximately two years. During this period, Varian owned the market. The only other competitor is Electa (bought Linac division from systems) and they have very few machines in the USA. Now these machines on the average cost around 1 mil+ and on the average last approximately 10-15 years before replacement. The barrier to entry to this field is tremendous. Varian is the original producer of these machines. Now, I know your thinking that in today's reimbursement arena, hospitals are not going to purchase 1 mil machines, wrong. Remember Radiation Oncology is 95% outpatient where the reimbursement is still decent and when you treat 30 patients a day on one of these machines at 300 a pop it begins to add up. And, you got to have one to be in the business. Another benefit is the that these machines have to be serviced often. Guess who provide the service. Yep, Varian. And the contracts aren't cheap. Parts neither. Anyway the post is getting long so let me get to the valuation. Here goes Current Price 16 5/8 Price/Book (mrq) 0.90 Price/Earnings (ttm) 9.84 Price/Sales (ttm) 0.37 Book Value (mrq) $18.59 Earnings (ttm) $1.70 Sales (ttm) $45.10 Cash (mrq) $4.40 After-Tax Income (ttm) $51.7M Sales (ttm) $1.36B Profit Margin (ttm) 3.8% Long-Term Debt/Equity (mrq) 0.19 Total Cash (mrq) $131.5M Market Capitalization $502.2M Shares Outstanding 30.0M Float 18.6M One other drawback to this company having split from the others it may become unpredictable for earnings predictions due to the large cost of Linacs and when they hit the books. One quarter could be huge and one not. What do you think? Do the numbers look worthy of discussion? 2