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Mesa Laboratories Inc. Message Board

  • greendog03 greendog03 May 16, 2012 9:26 AM Flag


    Don't know what bios earned in 2011 but paying over 2 times sales with the possibility of paying 3 times sales seems pretty expensive for a company with 22 employees then again I don't know how profitable they are since mesa management didn't want to add that little detail. Also, what debt and cash did they assume in this little acquistion? I always beleive an acquisiton should be immediately accretive to earnings or whats the point. i hate when they say next year it will be accretive. well, what would be the point of the acquistion if the acquistion isn't accretive.

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    • While I do have concerns about Sullivan given his recent stock sale that precipitated the bashing of the stock from its $59/share high, I look at the acquisition like this:

      The announcement indicated Bios' sales at $6.7 million with excellent profit margins. I'll assume that "excellent" means comparable to Mesa's margins or say 30% pre-tax. At that margin, pre-tax earnings would be $2.01 million. Assuming Mesa borrows $12 million of the acquisition price at say 5%, they would incur $600,000 in pre-tax interest expense resulting in $1.41 million in pre-tax earnings from Bios. After 35% in taxes, the after-tax earnings would be $916,000 or $0.28 per share. If you applied a p/e multiple of 20 times to those earnings, you'd come up with about $5.50 per share in value.

      Thoughts anyone?

    • You are right on the mark Greendog and it appears the market agrees today too.

      • 1 Reply to p0247
      • If the business is actually doing well you think its owners will give it up for a cheap? Of course not. The sign of a good acquisition may even be a slight premium as long as the business has potential for continued organic growth and cost synergies. You should get the cost synergies within a year, and organic growth may take a year or two beyond that before it is obvious a great purchase was made.

        Furthermore, i think this management team has done nothing but choose excellent acquisition targets and continue to grow this business conservatively. It seems there is a new breed of shareholder that likes to apply their imagined expertise in corporate finance to press releases while simultaneously missing the larger picture, mainly the future value of integration. With a rock solid record I'll go with management on this one. When i met them briefly at Sidoti, they were very conservative. I'll pull this post back up in a year when this stock is trading closer to $75

    • They said it will be accretive to the fiscal year ending march 2013. That means this year.

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