When I initially bought PD-Rx Pharmaceuticals a bit more than a year ago I was mainly attracted to the company because it was cheap on almost all metrics while it has a solid history of growth and profitability. The great thing about a blog is that you often have visitors that know more about the company than you do, and in the case of PD-Rx someone mentioned that a big competitor had left the business. Because of that development I expected that fiscal year 2014 would be a good one, and the company didn’t disappoint today.
Revenue was up 12% and, thanks to higher margins and operating leverage, earnings increased with a whopping 63% from $0.70/share to $1.14/share. The market didn’t ignore this, but with the stock up 52% it is – based on trailing earnings – just as cheap today as it was yesterday. The company is now trading 6.7x PE-ratio which is pretty cheap in itself even if you don’t expect any growth going forward. At the same time this ratio doesn’t give the company credit for the large, and rapidly growing, cash balance. The PE-ratio ex-cash is just 3.5x and the EV/EBIT ratio is now 2.2x. Amazing to have a stock in your portfolio that is up >150% but is still at this valuation.
Author is long PDRX
Excellent results indeed! Congrats. However, this year looks exceptionally good, margins will probably revert a bit.
That could certainly be the case, but it is hard to say something intelligent about it without really knowing the business. At the current valuation I don’t think it is something you need to worry about.
If you read the president’s letter, he seems to indicate that sales might be down a bit this year as is normal after a n increase.
It is still a good company and is still priced right in my humble opinion.
P.S. I also like how they are buying their own stock back.
In Yahoo finance the PE is 85?
Is it a mistake?
Hi, I’m wondering if anyone knows what the key product is that represents 49% (34% in 2013) of all sales. Please see Note 12 from the audited financial statements. I’m long the stock, but would like to better understand if I should worry about the risks associated with a key product like whatever this one may be.
Good question. I don’t know…