Taking a look at stock market action last week, we see price consolidating after breaking to new highs. Stocks are being bought even after rather poor earnings reports, and meanwhile there are a good number of stocks reporting legitimately positive quarters. Money is flowing into equities, and traders have a large number of earnings winners from which to choose.
Looking at the SPY chart, price made a major move to new highs on 7/23, and then broke out again on 7/30. The last two days of the week saw some end-of-day weakness, which provides some reason for short-term caution. In any case, this is a bullish chart.
I am focused on trading names that have already posted earnings results. This first company I found over at the Motley Fools CAPS site. One of the best-performing members,
UltraLong, provides good insight into many medical and pharmaceutical stocks. UltraLong is bearish on H1N1 research and development/vaccine companies, but here I want to post his comments on GXDX:
What I appreciate so much about Genoptix is its amazing potential. The company has by their estimates only 6% of the bone marrow market. They are working hard and finding ways to grow both their staff which has nearly doubled in a tad over a year, their office space which has expanded by nearly double, and their patient network has seen an over 60% increase in 2008 from 2007.
You want actual figures? Check out this revenue growth since 2004: 0.7M in 2004, 5.2M in 2005, 24.0M in 2006, 59.3M in 2007 and 116.2M in 2008. That sort of growth is absolutely amazing. What is particularly of interest is that expensing, though rising in accord with revenues has generally decreased on a percentage of revenue basis. This business is not only growing revenues at a marked rate, they are finding ways to be increasingly more cost efficient! In the past 2 years we’ve seen sales and marketing expenses drop from 26% of total revenue to 17% of total revenues and gross profit has ticked up from 45% to 60%! You want future growth? Well, analyst estimates, which have been historically shy of the mark, slate GXDX for 174M in 2009 and 231M in 2010 with EPS of $1.65 per share.
How about more actual fundamental figures? Cash….lots and lots of cash. Around 106M dollars of it actually with zero, goose egg, nada, zippo debt! That translates into roughly $6.38 per share. $6.38 of the true value of this company is derived strictly from its cash pile, and based on future projections of building expansion and workforce expansion, they are well covered and should not need to issue new shares to fund any operations.
Not enough; How about those quarterly earnings beats? Analysts have been trying to figure out Genoptix for months and simply can’t get a bead on how fast this company is growing. Earnings beats in the last year total 88%, 85%, 57% and 38% and the amazing thing here is there are 5-7 analysts consistently covering this company so they are really showing us something.
Everyone wants a company geared toward growth and one of the greatest aspects of GXDX is they plan to increase their sales & marketing workforce by over 105% in the next two years in addition to, as I mentioned earlier, expanding the size of their building. The bone marrow market makes up what Genoptix describes as a 1 billion dollar a year industry and if they can simply double their exposure in that industry, that’d be another 60-70M dollars a year more.
GXDX reported earnings on Friday, including 63% revenue growth and a 41% increase in second-quarter profit. Guidance was also raised. Stock price moved up nearly 15% on very heavy volume in reaction to the news.
Here's some other stocks I am either holding or watching for next week:
- MSPD
- NVEC
- CVGW
- UTHR
- CACC
- AMSC
- PEGA
- RADS
- BMRN
- ARST
- SLAB
- IFSIA
