Great Pharma/Tech Replay

Written by GSCR Staff   
Friday, 02 November 2012 09:02

The medical industry, and the companies that play in this space, have been subject to a wide variety of expert opinions and forecasts as Wall Street tries to figure out what will happen going forward.  Like most sectors, a lot of money remains on the sidelines waiting for more political certainty in the United States and Europe in particular.  With all that said, picking stocks from innovative companies with solid fundamentals and momentum is even more paramount.  There is no denying the world’s population is aging and there is money to be made in healthcare.

Simulations Plus Inc. (NASDAQ: SLP - $4.56) is a niche company with a very profitable story and strong growth forecast.  We profiled SLP several months ago at a price of $3.08, but wanted to bring it to your attention again.  The company has several software products and services that are used for pharmaceutical simulation research for companies, institutions, and students.  SLP was founded in 1996 in California, but now has operations on every continent.

The company began paying a dividend in the first quarter of this year, but still has a retention rate over 30% to allow for investment in future projects.  Other important numbers include an operating margin of almost 35% and a profit margin of almost 27%, with 8x cash on hand versus debt.  The stock reached a high of $4.89 in late September, but in the third quarter there was a significant deal with the United States Army and the company was the only non-European firm to join a European Consortium for developing Oral Bio-Availability Tools.  Our near term target price is $6.00.

The Goldman Small Cap Research Team

November 2, 2012

 

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