In retrospect, one of my luckiest stock picks has been Cantel Medical (CMN) a manufacturer of sterilization and infection control equipment.
Yesterday the stock hit a record high after the market digested its morning report on its fiscal Q4, and the analyst conference. Hansen is still a small cap, so it is not well-covered by Wall Street, sell-side analysts. I've been covering it since before I bought it in 2009.
My Seeking Alpha article on it is:
Cantel Medical: Proven Aggressive Growth and Stock Returns [September 27, 2013]
My summary of Q4 is: Cantel Medical (CMN) Q4 2013 results and analyst call
For earlier analyst conference summaries and stories see Cantel Medical (CMN) Analysis and News
I own stock in CMN. Because it grew so quickly, at one point it violated one of my portfolio rules (not too much of any one stock) and I sold a portion of my original stake. I has split twice since I bought it. It pays a small dividend.
For those who wonder about how Seeking Alpha works, I would share that contributors get paid per page view. Hence, if you are writing mainly for pay, you want to cover large cap stocks that have a lot of shareholders, and especially stocks that are constantly in the news, like Apple and Facebook. There is basically no pay for covering small caps like Cantel. I made $3.60 on my last Cantel article. Hence, small cap stocks tend to be under-covered at Seeking Alpha, just as they are elsewhere. Another issue is pump and dump. Because they are thinly traded, small caps are subject to attempts to pump and dump them.
Seeking Alpha articles also can warn you about overpriced stocks. Often in the feedback you can read a contrarian view, which at least should discourage hasty decision making.
But for that very reason, small-cap stocks also are more likely to harbor undiscovered value than large-caps.
I am a long-term investor and write for long-term investors. I think the vast majority of writers on Seeking Alpha are honest, but even honest writers (including me) can get over-excited about a stock. Never buy a stock without first, at minimum, reading the recent SEC documents and running the numbers yourself. That is true of large cap stocks as well. Look for value. Don't try to be a momentum player unless you are an insider. Never fully trust anyone. And above all:
Keep diversified!
Showing posts with label infection. Show all posts
Showing posts with label infection. Show all posts
Friday, September 27, 2013
Monday, June 10, 2013
Cantel Medical (CMN) outlook
My latest at Seeking Alpha
Cantel Medical (CMN) April quarter results and outlook [June 9, 2013]
Cantel Medical over the last 5 years has proven to have sound management. Growth prospects now appear to be as good as ever. The infection control market is growing because of the increase in global pandemics and antibiotic-resistant bacteria. This is not a hot short-term trade, but as a long-term investment I can highly recommend it.
You can also read my detailed notes on the analyst call:
Thursday, June 6, 2013
Cantel Medical Analyst Call (CMN)
I have posted my notes on today's Cantel Medical (CMN) analyst conference call here:
Cantel Medical fiscal third quarter 2013
Cantel had a good, but not spectacular, quarter.
I own stock in CMN. I have watched them expand revenue in the healthcare infection-prevention market for several years now. I see no reason Cantel should not continue to do well these next few years and see a gradual but significant rise in the stock price.
I hope to post a longer analysis at Seeking Alpha sometime today or tormorrow.
Cantel Medical fiscal third quarter 2013
Cantel had a good, but not spectacular, quarter.
I own stock in CMN. I have watched them expand revenue in the healthcare infection-prevention market for several years now. I see no reason Cantel should not continue to do well these next few years and see a gradual but significant rise in the stock price.
I hope to post a longer analysis at Seeking Alpha sometime today or tormorrow.
Monday, December 12, 2011
Cantel Medical Record Quarter
Cantel Medical (CMN) had a record fiscal Q1 2012 ending October 31, 2011, driven by organic growth and acquisitions.
Cantel Medical has been a good stock to hold so far in 2011, closing today at $26.91, up 18% from $22.81 a year ago, with a 52 week high of $28.50 and a 52 week low of $19.02. Not a bad showing in this tough market.
Cantel Medical is a smallish company (market capitalization today ended at $483 million) specializing in infection control through sterilization and disposables. Infection control is more cost effective than treatment for infection, which has become a much larger problem because of the evolution of multiple-antibiotic resistant bacteria.
Cantel is not a well-known name, even in hospitals, partly because it operates through named divisions. Minntech makes and markets endoscope and dialysis equipment sterilizers. Crosstex is the disposables business, working mostly in the dental market, but also moving into the general medical market. It makes face masks, sterilization patches, and other single-use items. Mar Cor makes machines to purify water, often for specialized medical needs. A smaller division is Saf-T-Pak, which produces specialty packaging for transporting specimens, and related materials.
For the latest fiscal quarter, Q1, Cantel reported revenue at $93.3 million, up 8% sequentially from $86.0 million, and up 29% from $72.0 million in the year-earlier quarter. GAAP net income was $6.2 million, up 32% sequentially from $4.7 million, and up 24% from $5.0 million year-earlier. GAAP EPS was $0.35, up 30% sequentially from $0.27 and up 21% from $0.29 year-earlier.
The latest acquisition was of Byrne Medical, announced August 2, 2011. Byrne manufactures products that act as replacements in gastrointestinal endoscopy procedures, eliminating the need for sterilization before reuse. The price of $100 million for a company with trailing annual revenues of $38.6 million seemed high on a revenue basis, but trailing annual pre-tax profits were $8.6 million. Cantel expects to increase gross margins in the business, which had a historical growth rate of over 20%. Byrne Medical had a 30% y/y increase in sales to $11.5 million in Q1 and is already accretive to earnings and cash flow.
Cantel has been fueling its growth with acquisitions. As a result, it ended the quarter with $116.5 million in debt, as against a cash balance of $19.6 million. If you, like me, have been burned occasionally by the poor acquisition strategies of other companies, you might not take this as a recommendation. However, for the few years I have followed Cantel they have done very well with acquisitions. They don't pay too much and sometimes acquire a division of a company they want, rather than the whole company. Then they cross-sell the new products with their established sales force. They have made it work well so far.
Meanwhile, the water purification business also keeps growing. The disposables business should ramp up when (or if) the unemployment rate tweaks down. People have been avoiding doctor and dental visits for economic reasons. When they have the dough to head back in for a checkup, the run rate will pick up again, meaning more use of infection prevention disposables.
So, in summary, the overall anti-infection story is a good one. Cantel is a pure infection play, and it has top-notch management. Should you be cautious because the stock is up 18% y/y? My guess is that the stock is currently priced about right for the short term, although the stock could make another run for its 52 week highs, if the overall market firms up. The trailing P/E ratio at the end of today was 22 (per NASDAQ), which is reasonable for a company with a strong track record of growth. In the longer run I expect continuing profit growth will compell a higher stock price. Cantel Medical should be attractive to long-term investors looking for diversification in the healthcare space.
As a kicker, the dividend was recently raised to $0.14 per year, paid semi-annually.
For more details on quarter results, see my Cantel Medical Q4 fiscal 2011 analyst call summary.
Disclosure: I am long Cantel and will not change my position in the next 2 weeks.
Keep Diversified!
Cantel Medical has been a good stock to hold so far in 2011, closing today at $26.91, up 18% from $22.81 a year ago, with a 52 week high of $28.50 and a 52 week low of $19.02. Not a bad showing in this tough market.
Cantel Medical is a smallish company (market capitalization today ended at $483 million) specializing in infection control through sterilization and disposables. Infection control is more cost effective than treatment for infection, which has become a much larger problem because of the evolution of multiple-antibiotic resistant bacteria.
Cantel is not a well-known name, even in hospitals, partly because it operates through named divisions. Minntech makes and markets endoscope and dialysis equipment sterilizers. Crosstex is the disposables business, working mostly in the dental market, but also moving into the general medical market. It makes face masks, sterilization patches, and other single-use items. Mar Cor makes machines to purify water, often for specialized medical needs. A smaller division is Saf-T-Pak, which produces specialty packaging for transporting specimens, and related materials.
For the latest fiscal quarter, Q1, Cantel reported revenue at $93.3 million, up 8% sequentially from $86.0 million, and up 29% from $72.0 million in the year-earlier quarter. GAAP net income was $6.2 million, up 32% sequentially from $4.7 million, and up 24% from $5.0 million year-earlier. GAAP EPS was $0.35, up 30% sequentially from $0.27 and up 21% from $0.29 year-earlier.
The latest acquisition was of Byrne Medical, announced August 2, 2011. Byrne manufactures products that act as replacements in gastrointestinal endoscopy procedures, eliminating the need for sterilization before reuse. The price of $100 million for a company with trailing annual revenues of $38.6 million seemed high on a revenue basis, but trailing annual pre-tax profits were $8.6 million. Cantel expects to increase gross margins in the business, which had a historical growth rate of over 20%. Byrne Medical had a 30% y/y increase in sales to $11.5 million in Q1 and is already accretive to earnings and cash flow.
Cantel has been fueling its growth with acquisitions. As a result, it ended the quarter with $116.5 million in debt, as against a cash balance of $19.6 million. If you, like me, have been burned occasionally by the poor acquisition strategies of other companies, you might not take this as a recommendation. However, for the few years I have followed Cantel they have done very well with acquisitions. They don't pay too much and sometimes acquire a division of a company they want, rather than the whole company. Then they cross-sell the new products with their established sales force. They have made it work well so far.
Meanwhile, the water purification business also keeps growing. The disposables business should ramp up when (or if) the unemployment rate tweaks down. People have been avoiding doctor and dental visits for economic reasons. When they have the dough to head back in for a checkup, the run rate will pick up again, meaning more use of infection prevention disposables.
So, in summary, the overall anti-infection story is a good one. Cantel is a pure infection play, and it has top-notch management. Should you be cautious because the stock is up 18% y/y? My guess is that the stock is currently priced about right for the short term, although the stock could make another run for its 52 week highs, if the overall market firms up. The trailing P/E ratio at the end of today was 22 (per NASDAQ), which is reasonable for a company with a strong track record of growth. In the longer run I expect continuing profit growth will compell a higher stock price. Cantel Medical should be attractive to long-term investors looking for diversification in the healthcare space.
As a kicker, the dividend was recently raised to $0.14 per year, paid semi-annually.
For more details on quarter results, see my Cantel Medical Q4 fiscal 2011 analyst call summary.
Disclosure: I am long Cantel and will not change my position in the next 2 weeks.
Keep Diversified!
Wednesday, September 28, 2011
Cantel Medical Keeps Growing
Cantel Medical has been a good stock to hold so far in 2011, closing today at $21.28, up 30% from $16.38 a year ago, with a 52 week high of $28.29 and a 52 week low of $15.57. Not a bad showing in this tough market. Cantel is not a household word, so I thought I'd fill in my readers on what they do and why they might want to own a piece of this company.
Cantel Medical is a smallish company (market capitalization today ended at $366 million). Cantel specializes in infection control through sterilization and disposables. I know that infection control is more cost effective than treatment, and is becoming a much larger problem because of the evolution of multiple-antibiotic resistant bacteria. I watched Cantel for a while, then bought stock a couple of times when I thought the valuation was good.
Cantel is not a well-known name, even in hospitals, partly because it operates through named divisions. Minntech makes and markets endoscope and dialysis equipment sterilizers. Crosstex is the disposables business, working mostly in the dental market, but also moving into the general medical market. It makes face masks, sterilization patches, and other single-use items. Mar Cor makes machines to purify water, often for specialized medical needs. A smaller division is Saf-T-Pak, which produces specialty packaging for transporting specimens, and related materials.
When there are infectious disease scares Cantel gets bursts of extra revenue, so in evaluating the stock you might want to both zero-out such bursts to get a real trend line, and also figure that over time those bursts do add up.
Also, while Cantel does develop products and grows by increasing sales organically, they also grow by acquisition. If you, like me, have been burned occasionally by the poor acquisition strategies of other companies, you might not take this as a recommendation. However, for the few years I have followed Cantel they have done very well with acquisitions. They don't pay too much and they usually acquire a division of a company they want, rather than the whole company. Then they cross-sell the new products with their established sales force.
The latest acquisition was of Byrne Medical, announced August 2, 2011. Byrne manufactures products that act as replacements in gastrointestinal endoscopy procedures, eliminating the need for sterilization before reuse. The price of $100 million for a company with trailing annual revenues of $38.6 million seems high on a revenue basis, but trailing annual pre-tax profits were $8.6 million. Cantel expects to increase gross margins in the business, which has a historical growth rate of over 20%. The business is expected to be accretive over fiscal year 2012 ending July 31, 2012.
Since Cantel is already in the endoscopy business, cross-selling is a given. The combined endoscopy businesses will have 80 sales and marketing personnel. Acquiring Byrne is the largest transaction in Cantel's history. Even before the combination Cantel's recent endoscope sterilizer equipment sales had been ramping rapidly. The newer sterilization machines are called reprocessors; they do helpful things like inventory management that the aging machines can't do.
Meanwhile, the water purification business just keeps growing. Also the disposables business should ramp up when (of if) the unemployment rate tweaks down. People have been avoiding doctor and dental visits for economic reasons; when they have the dough to head back in for a checkup, the run rate will pick up again.
So, in summary, the overall anti-infection story is a good one. Cantel is a pure infection play, and it has top-notch management. Should you be cautious because the stock is up 33% y/y? My guess is that even in the short term the stock could make another run for its 52 week highs, if the overall market firms up. The trailing P/E ratio at the end of today was 18 (per NASDAQ), which is still reasonable for a company with a strong growth track record. Today's ending price seems fair to me and attractive for long-term investors looking for diversification in the healthcare space.
For more details on last quarter's results, see my Cantel Medical Q3 fiscal 2011 analyst call summary.
Disclosure: I am long Cantel, and have no plans to buy or sell in the next 2 weeks.
Cantel Medical is a smallish company (market capitalization today ended at $366 million). Cantel specializes in infection control through sterilization and disposables. I know that infection control is more cost effective than treatment, and is becoming a much larger problem because of the evolution of multiple-antibiotic resistant bacteria. I watched Cantel for a while, then bought stock a couple of times when I thought the valuation was good.
Cantel is not a well-known name, even in hospitals, partly because it operates through named divisions. Minntech makes and markets endoscope and dialysis equipment sterilizers. Crosstex is the disposables business, working mostly in the dental market, but also moving into the general medical market. It makes face masks, sterilization patches, and other single-use items. Mar Cor makes machines to purify water, often for specialized medical needs. A smaller division is Saf-T-Pak, which produces specialty packaging for transporting specimens, and related materials.
When there are infectious disease scares Cantel gets bursts of extra revenue, so in evaluating the stock you might want to both zero-out such bursts to get a real trend line, and also figure that over time those bursts do add up.
Also, while Cantel does develop products and grows by increasing sales organically, they also grow by acquisition. If you, like me, have been burned occasionally by the poor acquisition strategies of other companies, you might not take this as a recommendation. However, for the few years I have followed Cantel they have done very well with acquisitions. They don't pay too much and they usually acquire a division of a company they want, rather than the whole company. Then they cross-sell the new products with their established sales force.
The latest acquisition was of Byrne Medical, announced August 2, 2011. Byrne manufactures products that act as replacements in gastrointestinal endoscopy procedures, eliminating the need for sterilization before reuse. The price of $100 million for a company with trailing annual revenues of $38.6 million seems high on a revenue basis, but trailing annual pre-tax profits were $8.6 million. Cantel expects to increase gross margins in the business, which has a historical growth rate of over 20%. The business is expected to be accretive over fiscal year 2012 ending July 31, 2012.
Since Cantel is already in the endoscopy business, cross-selling is a given. The combined endoscopy businesses will have 80 sales and marketing personnel. Acquiring Byrne is the largest transaction in Cantel's history. Even before the combination Cantel's recent endoscope sterilizer equipment sales had been ramping rapidly. The newer sterilization machines are called reprocessors; they do helpful things like inventory management that the aging machines can't do.
Meanwhile, the water purification business just keeps growing. Also the disposables business should ramp up when (of if) the unemployment rate tweaks down. People have been avoiding doctor and dental visits for economic reasons; when they have the dough to head back in for a checkup, the run rate will pick up again.
So, in summary, the overall anti-infection story is a good one. Cantel is a pure infection play, and it has top-notch management. Should you be cautious because the stock is up 33% y/y? My guess is that even in the short term the stock could make another run for its 52 week highs, if the overall market firms up. The trailing P/E ratio at the end of today was 18 (per NASDAQ), which is still reasonable for a company with a strong growth track record. Today's ending price seems fair to me and attractive for long-term investors looking for diversification in the healthcare space.
For more details on last quarter's results, see my Cantel Medical Q3 fiscal 2011 analyst call summary.
Disclosure: I am long Cantel, and have no plans to buy or sell in the next 2 weeks.
Friday, March 11, 2011
Cantel Medical (CMN) Growth Spurt
Cantel Medical has been a good stock to hold in 2010 and so far in 2011, recently crossing the line to over $25 per share after showing a 52 week low of $13.39. Cantel is not a household word, so I thought I'd fill in my readers on what they do and why they might want to own a piece of this company.
The biotechnology stocks I own are mostly drug plays, with one surgical robotics play. Cantel Medical is a smallish company (market capitalization today ended at $440 million). Cantel specializes in infection control through sterilization and disposables. I know that infection control is more cost effective than treatment, and is becoming a much larger problem because of the evolution of multiple-antibiotic resistant bacteria. I watched Cantel for a while, then bought stock a couple of times when I thought the valuation was good.
Cantel is not a well-known name, even in hospitals, partly because it operates through named divisions. Minntech makes and markets endoscope and dialysis equipment sterilizers. Crosstex is the disposables business, working mostly in the dental market, but also moving into the general medical market. It makes face masks, sterilization patches, and other single-use items. Mar Cor makes machines to purify water, often for specialized medical needs. A smaller division is Saf-T-Pak, which produces specialty packaging for transporting specimens, and related materials.
When there are infectious disease scares Cantel gets bursts of extra revenue, so in evaluating the stock you might want to both zero-out such bursts to get a real trend line, and also figure that over time those bursts do add up.
Also, while Cantel does develop products and grows by increasing sales organically, they also grow by acquisition. If you, like me, have been burned by poor acquisition strategies of other companies, you might not take this as a recommendation. However, for the few years I have followed Cantel they have done very well with acquisitions. They don't pay to much and they usually acquire a division of a company they want, rather than the whole company. Then they cross-sell the new products with their established sales force. They have made it work.
As to the latest bump, management attributes that mainly to strong endoscope sterilizer equipment sales. The newer machines are called reprocessors; they do helpful things like inventory management that the aging machines can't do. For some reason their are a lot of aging endoscope reprocessors out there, particularly in VA hospitals, and 2011 seems to be the year they have a capital equipment budget for new machines. This burst will probably slow down later in 2011, but will stay above 2010 levels.
The water purification business just keeps growing. Also the disposables business should ramp up as the unemployment rate tweaks down this year. People have been avoiding doctor and dental visits for economic reasons; when they have the dough to head back in for a checkup, the run rate will pick up again.
So, in summary, the overall anti-infection story is a good one. Cantel is a pure infection play, and it has top-notch management. Should you be cautious because the stock has already had a good run lately? Sure, but the trailing P/E ratio at the end of today was 22.6 (per NASDAQ), which is still reasonable for a company with a strong growth track record. Today's ending price seems fair to me and attractive for long-term investors looking for diversification in the healthcare space. You might want to note that the company has more debt than cash, as debt was used to make recent acquisitions, but cash generation can make quick work of the debt.
For more details on quarter results, see my Cantel Medical Q2 fiscal 2011 analyst call summary.
The biotechnology stocks I own are mostly drug plays, with one surgical robotics play. Cantel Medical is a smallish company (market capitalization today ended at $440 million). Cantel specializes in infection control through sterilization and disposables. I know that infection control is more cost effective than treatment, and is becoming a much larger problem because of the evolution of multiple-antibiotic resistant bacteria. I watched Cantel for a while, then bought stock a couple of times when I thought the valuation was good.
Cantel is not a well-known name, even in hospitals, partly because it operates through named divisions. Minntech makes and markets endoscope and dialysis equipment sterilizers. Crosstex is the disposables business, working mostly in the dental market, but also moving into the general medical market. It makes face masks, sterilization patches, and other single-use items. Mar Cor makes machines to purify water, often for specialized medical needs. A smaller division is Saf-T-Pak, which produces specialty packaging for transporting specimens, and related materials.
When there are infectious disease scares Cantel gets bursts of extra revenue, so in evaluating the stock you might want to both zero-out such bursts to get a real trend line, and also figure that over time those bursts do add up.
Also, while Cantel does develop products and grows by increasing sales organically, they also grow by acquisition. If you, like me, have been burned by poor acquisition strategies of other companies, you might not take this as a recommendation. However, for the few years I have followed Cantel they have done very well with acquisitions. They don't pay to much and they usually acquire a division of a company they want, rather than the whole company. Then they cross-sell the new products with their established sales force. They have made it work.
As to the latest bump, management attributes that mainly to strong endoscope sterilizer equipment sales. The newer machines are called reprocessors; they do helpful things like inventory management that the aging machines can't do. For some reason their are a lot of aging endoscope reprocessors out there, particularly in VA hospitals, and 2011 seems to be the year they have a capital equipment budget for new machines. This burst will probably slow down later in 2011, but will stay above 2010 levels.
The water purification business just keeps growing. Also the disposables business should ramp up as the unemployment rate tweaks down this year. People have been avoiding doctor and dental visits for economic reasons; when they have the dough to head back in for a checkup, the run rate will pick up again.
So, in summary, the overall anti-infection story is a good one. Cantel is a pure infection play, and it has top-notch management. Should you be cautious because the stock has already had a good run lately? Sure, but the trailing P/E ratio at the end of today was 22.6 (per NASDAQ), which is still reasonable for a company with a strong growth track record. Today's ending price seems fair to me and attractive for long-term investors looking for diversification in the healthcare space. You might want to note that the company has more debt than cash, as debt was used to make recent acquisitions, but cash generation can make quick work of the debt.
For more details on quarter results, see my Cantel Medical Q2 fiscal 2011 analyst call summary.
Thursday, October 14, 2010
Cantel Medical (CMN) Growth Plans
Cantel Medical is one of the few companies with a focus exclusively on infection control. Last year it had a banner fiscal Q4, ending July 31, 2009, because the H1N1 flu scare created a run on its line of disposable face masks. Despite that, Cantel management reported revenue and earnings growth for its latest Q4 ending July 31, 2010 at its analyst conference call yesterday.
Revenue was $69.8 million, up 5% sequentially from $66.6 million in Q3, and up 4.5% from $66.8 million year-earlier. Net income was $4.6 million, up 7% sequentially from $4.3 million in Q3, and up 7% from $4.3 million year-earlier. EPS (earnings per share) were $0.27, up 8% sequentially from $0.25 in Q3, and up 4% from $0.26 year-earlier.
Gains in its endoscopy sterilization business and in water purification led to the record revenue. Disposables and services were off y/y because of the mask issue. The dialysis segment was also down, but this was due to purposefully dropping certain low margin items, resulting in a better profit margin.
In good news for American workers, the recently announced acquisition of the American water sterilization business of Gambro means that jobs will be moved to the U.S. from Sweden and be integrated with Cantel's manufacturing operations in the United States. The year prior to the acquisition this business generated revenues of $14 million. It will be added to Cantel's Mar Cor Purification subsidiary.
Disinfection and sterilization are major trends in the U.S. healthcare market. The increasing number of seniors, the problem of disease transmitted in hospitals, and the globalization of infections are all pushing volume and the need for quality improvement in these markets.
Cantel has increased its mask manufacturing capacity to be better able to cope with the next airborne infection epidemic.
Following the Gambro deal, Cantel has about $23 million in cash but $33 million in debt. Cash generation in Q4 was $11.6 million. Cantel has arranged for credit for further acquisitions. As long as they don't overpay for the acquisitions, with interest rates low this is a good expansion strategy.
Internal development is also robust. R&D expense in the quarter was $1.4 million, but the plan is to increase R&D. Revenues from new products could begin in 2011 and ramp in 2012. Compared to biotechnology companies, where R&D spend is much heavier and the risk of failure is high, this is a great model.
I see Cantel Medical as a company with excellent management and, at today's prices anyway, a good value for buyers. If you can buy now with a long term (minimum 1 year) investment view, you have a fairly safe outlook with likely healthy gains in revenues and profits. Of course there are the usual risks: failure of the FDA to approve an innovation and competition from other companies.
My own strategy is to accumulate Cantel over time, depending on its value relative to other opportunities. I have watched Cantel Medical (CMN) since 2008 and first bought stock in December of 2009. I have listened to a couple of prior analyst conference calls, and posted a summary for the Cantel Medical Q4 2010 call.
More data:
Cantel Medical Corporation
Revenue was $69.8 million, up 5% sequentially from $66.6 million in Q3, and up 4.5% from $66.8 million year-earlier. Net income was $4.6 million, up 7% sequentially from $4.3 million in Q3, and up 7% from $4.3 million year-earlier. EPS (earnings per share) were $0.27, up 8% sequentially from $0.25 in Q3, and up 4% from $0.26 year-earlier.
Gains in its endoscopy sterilization business and in water purification led to the record revenue. Disposables and services were off y/y because of the mask issue. The dialysis segment was also down, but this was due to purposefully dropping certain low margin items, resulting in a better profit margin.
In good news for American workers, the recently announced acquisition of the American water sterilization business of Gambro means that jobs will be moved to the U.S. from Sweden and be integrated with Cantel's manufacturing operations in the United States. The year prior to the acquisition this business generated revenues of $14 million. It will be added to Cantel's Mar Cor Purification subsidiary.
Disinfection and sterilization are major trends in the U.S. healthcare market. The increasing number of seniors, the problem of disease transmitted in hospitals, and the globalization of infections are all pushing volume and the need for quality improvement in these markets.
Cantel has increased its mask manufacturing capacity to be better able to cope with the next airborne infection epidemic.
Following the Gambro deal, Cantel has about $23 million in cash but $33 million in debt. Cash generation in Q4 was $11.6 million. Cantel has arranged for credit for further acquisitions. As long as they don't overpay for the acquisitions, with interest rates low this is a good expansion strategy.
Internal development is also robust. R&D expense in the quarter was $1.4 million, but the plan is to increase R&D. Revenues from new products could begin in 2011 and ramp in 2012. Compared to biotechnology companies, where R&D spend is much heavier and the risk of failure is high, this is a great model.
I see Cantel Medical as a company with excellent management and, at today's prices anyway, a good value for buyers. If you can buy now with a long term (minimum 1 year) investment view, you have a fairly safe outlook with likely healthy gains in revenues and profits. Of course there are the usual risks: failure of the FDA to approve an innovation and competition from other companies.
My own strategy is to accumulate Cantel over time, depending on its value relative to other opportunities. I have watched Cantel Medical (CMN) since 2008 and first bought stock in December of 2009. I have listened to a couple of prior analyst conference calls, and posted a summary for the Cantel Medical Q4 2010 call.
More data:
Cantel Medical Corporation
Wednesday, December 9, 2009
I Buy Cantel Medical (CMN)
Today I bought an initial bit of Cantel Medical, ticker CMN. This was something of a lightning decision, compared to my usual research and long-term observation before buying a stock. Yesterday, while researching it, I thought the company's focus on infection control was interesting, and I saw that it would report quarter results today. The quarter ending October 31, 2009 results were better than expected. I could have bought it cheaper yesterday, but I think the price is still very attractive today.
Cantel Medical can be thought of as a conglomerate where the separate units each are engaged in some technology or service related to infection control. Its Minntech division makes sterile disposables for dialysis and other medical procedures.
Crosstex provides sterile disposable sundries for dentistry and medical use. Mar Cor Purification makes systems for ultra-pure water for medical use, including for biotechnology research and production. Saf-T-Pak specializes in packaging that is sterile or that is used to transport biohazards.
Cantel Medical reported a particularly good quarter for both revenues and profits, partly due to a surge in demand for masks for flu season. However, while this sweetener will probably back off next quarter, I see a growing demand for infection prevention technologies. With many species and strains of antibiotic-resistant bacteria becoming increasingly common, the best way to protect patients is to use sterile disposables. With the globalization of the economy viral diseases spread very rapidly. Again, the best procedure is to protect people with sterile disposables.
See the Cantel Medical fiscal Q1 2010 results for the press release.
Normally I like to know more about a company before I plunge in, but having bought a small amount of stock, now I will watch Cantel closely and report back in this blog.
Cantel Medical can be thought of as a conglomerate where the separate units each are engaged in some technology or service related to infection control. Its Minntech division makes sterile disposables for dialysis and other medical procedures.
Crosstex provides sterile disposable sundries for dentistry and medical use. Mar Cor Purification makes systems for ultra-pure water for medical use, including for biotechnology research and production. Saf-T-Pak specializes in packaging that is sterile or that is used to transport biohazards.
Cantel Medical reported a particularly good quarter for both revenues and profits, partly due to a surge in demand for masks for flu season. However, while this sweetener will probably back off next quarter, I see a growing demand for infection prevention technologies. With many species and strains of antibiotic-resistant bacteria becoming increasingly common, the best way to protect patients is to use sterile disposables. With the globalization of the economy viral diseases spread very rapidly. Again, the best procedure is to protect people with sterile disposables.
See the Cantel Medical fiscal Q1 2010 results for the press release.
Normally I like to know more about a company before I plunge in, but having bought a small amount of stock, now I will watch Cantel closely and report back in this blog.
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