CryoLife: A Small Cap that Won’t Make You CRY
|Written by GSCR Staff|
|Wednesday, 06 January 2016 06:51|
Happy New Year! We started off with a Chinese meltdown on Monday that created a tsunami in Europe and the U.S. for a big sell off. We do not need to tell our readers that we have entered a rough market for small caps, a correction according to optimists and bear market for pessimists. The time to find a stock that got the snot beat out of it last year but offers value is in order.
We looked in our go to sector, biotech. Below is the one year performance chart for CryoLife, Inc. (NYSE – CRY - $10.28) that shows the stock is 16% from its $12.29 high a year ago.
CRY 1-Year and 50-Day EMA Chart
CryoLife, Inc., together with its subsidiaries, manufactures and distributes medical devices worldwide. It also processes and distributes implantable human tissues for use in cardiac and vascular surgeries. The Company operates in two segments, Medical Devices and Preservation Services. It offers surgical sealants and hemostats, including BioGlue Surgical Adhesive, a polymer consisting of bovine blood protein and an agent for cross-linking proteins for cardiac, vascular, pulmonary, and general surgical applications; BioFoam Surgical Matrix for use as an adjunct in the sealing of abdominal parenchymal tissues and as an adjunct to hemostasis in cardiovascular surgery when cessation of bleeding by ligature or other conventional methods is ineffective or impractical; and PerClot, an absorbable powdered hemostat for use in ENT applications. The Company also provides cardiac laser therapy products, which include laser console system and single-use, as well as fiber-optic hand-pieces for the treatment of coronary artery disease in patients with severe angina; markets HeRO Graft, a proprietary graft-based solution for end-stage renal disease (ESRD) hemodialysis patients with limited access options and central venous stenosis; and offers preservation services.
One of the key factors we are looking for in a downtrodden stock like CRY is overall firm debt. The Company has 0 as of the end of 3Q15. On the technical side, a plus is the short float of 3.7%, well below the 5% ‘low’ benchmark. Gross margin of 61% versus the industry average of 57% indicates an efficiency and price point optimization. The forward P/E is 48x may seem high, but the trailing is 95x! Finally, from a macroeconomic perspective, the diverse product line the Company offers should enable the firm to meet its expected revenue for 2016 of $154 million, a 7% increase over 2014.
We believe an overall trend of looking for value in 2015 losers will persist in the small cap market and drive accumulation in select stocks. CRY offers some major upside according to a number of critical metrics and should get back to the $12 range by the middle of 2Q16.
Have a great day!
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