KeyStone’s Your Stock Our Take: BioSyent Inc. (RX:TSX-V), Star: Solium Capital Inc. (SUM:TSX), Dog: Lassonde Industries Inc. (LAS.A:TSX).
This week in our Your Stock, Our Take segment we look at BioSyent Inc. (RX:TSX-V), a Canadian specialty pharmaceutical company. Primary product is FeraMAX®, an over-the-counter iron supplement. A listener asks if it is time to take a look at this stock again in 2019? Our Star of the week is (should be no stranger to KeyStone Clients) – Zynex Inc. (ZYXI: NASDAQ), which manufactures and sells non-invasive medical devices for pain management, stroke rehabilitation, cardiac monitoring and neurological diagnostics. Primary offering electrotherapy medical devices used for pain management and rehabilitation. The stock has surged 82% year-to-date and roughly the same amount since our BUY recommendation just over a year ago. The company recently announced that it has graduated to the NASDAQ exchange and will be announcing its 2018 annual results and outlook next week. Finally, our Dog of the week is Lassonde Industries Inc. (LAS.A:TSX), a North American leader in the development, manufacture and sale of a wide range of ready-to-drink fruit and vegetable juices and drinks. The stock is down over 13% in the last couple days. Is it a Dog or an opportunity?
Your Stock, Our Take
From what I see BioSyent Inc. (RX:TSX-V) is profitable and has grown its business long-term – sounds like something KeyStone would like – what is your take?
- – via twitter.
Your Stock, Our Take
BioSyent Inc. (RX:TSX-V)
Current Price: $8.06
Market Cap: $115.96 Million
What does the company do?
BioSyent is a publicly traded specialty pharmaceutical company which, through its wholly-owned subsidiaries, BioSyent Pharma Inc. (BioSyent Pharma) and BioSyent Pharma International Inc., sources, acquires or in-licenses and further develops pharmaceutical and other healthcare products for sale in Canada and certain international markets. Primary product is FeraMAX® is an over-the-counter iron supplement – in fact, it ranked at the #1 iron supplement recommended by both Canadian Pharmacists and Physicians
Hedley Technologies Ltd. and Hedley Technologies (USA) Inc., also wholly-owned subsidiaries of BioSyent, operate the company’s legacy business, marketing biologically and health friendly non-chemical insecticides (Legacy Business).
Recent Quarterly Financials
Revenue fell 3% from $5.4 million in Q3 2017 to $5.3 million in Q3 2018. Adjusted EBITDA fell 10% from $2.0 million, or 36% of revenue, to $1.8 million, or 34% of revenue. Cash flow from operations fell 17% from $1.9 million to $1.6 million. Net income grew 2% from $1.28 to $1.30.
Q3 2018 marked BioSyent’s 33 consecutive profitable quarter. Having said this, the company’s revenue declined year-over-year in the third quarter for the first time in years.
Positive: Canadian pharmaceutical business delivered 11% growth during the quarter, with growth generated from across the product portfolio.
Near-Term Negatives: The companies International pharmaceutical business faced some challenges due to trade restrictions in a particular export market which resulted in reductions in the number and size of planned international FeraMAX® shipments during the quarter. While management does not expect these challenges to persist over the long-term, the company anticipates further instability in international FeraMAX® sales in the near-term. Growth in the company’s Legacy Business during the quarter also declined when compared with a particularly strong Q3 2017.
From a fundamental perspective, BioSyent boasts a great balance sheet with $22.6 million in cash and cash equivalents or $1.56 in cash per share. After removing the cash per share, the stock trades at 17.2 times trailing earnings, which is slightly below the market average. We expect the Canadian core operations to grow at a 10-15% rate in 2019, not including potential acquisitions. The International Business is weaker near-term. Given this uncertainty, and despite the fact we like the cash generation and see better value than we have in years in the stock, we continue to Monitor and look for potential entry points in 2019 if a catalyst event occurs.
Zynex Inc. (ZYXI: NASDAQ)
Current Price: $5.22
Market Cap: $169.10 Million
What does the company do?
Founded in 1996, Headquartered Lone Tree, Colorado, Zynex Inc. is a medical technology company specializing in the manufacture and sale of non-invasive medical devices for pain management, stroke rehabilitation, cardiac monitoring and neurological diagnostics. The company’s primary business is the marketing and sales of its own design of electrotherapy medical devices used for pain management and rehabilitation.
Zynex has jumped more than 80% year-to-date in 2019 and 40% in the last 5-days.
What is Driving the Stock?
In the end, it is the underlying numbers that drive the stock and Zynex has delivered year-to-date in 2018 producing record earnings. However, Zynex also announced an important event in the evolution of the business in the past week. On February 7, 2019, management reported that its common shares have been approved to list on the Nasdaq Capital Market and began trading this morning (February 12, 2019) under its existing symbol (ZYXI).
While the listing itself has no impact on the daily operations of Zynex nor will it improve the underlying numbers and fundamentals, it can help the company communicate its story to a broader audience – particularly to institutional investors.
Zynex was recently recommended in December 2017, with the stock trading in the $2.95 range. It is an excellent example of the type of Discovery Research KeyStone Financial provides clients to our US Research. The stock had basically zero coverage when we recommend it as a high growth and now cash rich business with zero debt. It has delivered record earnings and now graduated to the NASDAQ – fulfilling a promise.
The stock has now increased 78% since the recommendation. This does not include the “bonus” $0.07 dividend the stock paid shareholders early in 2019. Our clients received a full update last week on the stock which expects to grow once again in 2019 following a record 2018.
The stock’s performance year-to-date, over the past week and graduation to the NASDAQ make it Star of the week! Congratulations to clients who purchased on our 2017 and early 2018 recommendation.
Lassonde Industries Inc. (LAS.A:TSX)
Current Price: $175.50
Market Cap: $1.223 Billion
Stock down 13% in the past 2 days.
What does the company do?
Lassonde Industries Inc. is a North American leader in the development, manufacture and sale of a wide range of ready-to-drink fruit and vegetable juices and drinks marketed under brands such as Apple & Eve, Everfresh, Fairlee, Fruité, Graves, Oasis and Rougemont.
Lassonde is also one of the two largest producers of store brand shelf-stable fruit juices and drinks in the United States and a major producer of cranberry sauces.
Lassonde recently acquired Old Orchard Brands, LLC (OOB), a fruit juice and beverage manufacturing company based in Sparta, Michigan . OOB’s product portfolio consists of nearly 100 different varieties, including 100% juice, 100% juice blends, reduced-sugar juice cocktails, seasonal lemonades and flavoured teas. Moreover, OOB is a leader in ready-to-drink fruit juices and drinks in the Central United States . Old Orchard is also the second largest frozen juice concentrates brand in the United States .
What drove the stock lower?
Weaker-than-expected Q4 2018 results dropped the stock. This week, the company announced that its operating profit will be down 40% to $25 million in the fourth quarter of 2018 from $42.2 million in the fourth quarter of fiscal 2017.
As at Q3 3018 the company had only stated that given a weaker current environment, Lassonde stated it had expected only a slight decline in operating profit in the last quarter of 2018 compared to the same period of 2017. 40% is not a slight decline in operating profit and thus the sharp drop in the share price.
The company stated the decrease is fully attributable to lower profitability from the Company’s U.S. operations that is due, among other factors, to a decrease slightly above 7% in the sales of the U.S. subsidiaries (when the foreign exchange impact and OOB’s sales are excluded to maintain a comparable basis).
Lassonde stated that it is adjusting its business model to mitigate rapidly rising input costs. The company aims to improve its utilization of production capacity by replacing low-margin contracts with contracts that better reflect the current state of the U.S. market. However, a delay in finalizing one of these new contracts and strong pressure from the company’s main competitor in the United States have affected sales.
We expect further near-term pain.
The company is well run, but growth has stalled in the last 3 to 4 years. We monitor it as valuations are decent, but growth would have to accelerate for us to be an investor in the stock.
The drop this week, gives it the coveted status as our Dog of the Week.