PD-Rx Pharmaceuticals posted their 2017 annual report online yesterday. Last year was a pretty solid year with revenues increasing by 21% from $21.5 million to $26.0 million. Net income saw a similar percentage increase and went from 0.30/share to 0.36/share. Given that PD-Rx’s past revenues have been somewhat volatile I don’t think we should put to much weight on this growth, they are now basically back to the level they achieved in 2013. As always, the company provides a nice overview of historical annual sales in a “classic” PowerPoint look:
Besides good operating performance there were two positive developments during the year. First of all, the company paid its first ever dividend in June this year. Compared to PD-Rx’s cash balance of $4.85/share the dividend of $0.30/share was not very big, but it does represent a 82% payout ratio for the year. Hopefully this wasn’t a one-off occurrence.
Secondly, the passage of Trump’s tax bill should provide a nice boost to earnings in the years to come. PD-Rx Pharmaceuticals, like many US micro-caps, pays the full US corporate tax rate, so the drop from 35% to 21% should boost earnings by approximately 22%. If we crudely value PD-Rx at the value of its cash balance plus ten times 2017 earnings, value per share jumps from $8.49 to $9.33 if we adjust for the lower tax rate. Given that shares currently trade at $5.65 I still think they offer a pretty compelling opportunity.
Author is long PDRX