The PR headline trumpeting a 62% rise in net income overstates: 1) Revenue growth all was from acquisitions.On a consecutive qtr basis, revenue actually was down. So profit growth was driven entirely by margin improvement, not top line growth. How long does that kind of growth continue for? 2) Water purification segment: consecutive qtr revenue was up about 1%, but operating profit was down by over 2% - margins eroded on virtually no sales growth. 3) "medivators" - if you take out the sales contribution from Byrne, the core business saw a 5% year over year revenue drop, and an 8% consecutive qtr revenue drop. Combined, the segment actually saw a 4.4% consecutive quarter revenue drop. And, on a consecutive quarter basis, the Endoscope segment saw a 7% drop in operating profit - a margin decline. 4) With FY2012 EPS estimated at $1.10, this stock trades at 22.5x EPS. It's rich. 5) with all that acquisition debt, they benefit from artificially low interest rates. Put rates back to 'normal', and they will lose $0.10 eps each year just for interest, IMO.
All that said, I actually think this is a pretty good company, just the stock has overreacted to the 62% headline.
Isn't it stated that acquisitions is a part of the growth strategy? Certainly debt increased after the last acquisition, but it is still not 'dangerous'. Current Ratio is still reasonable. And the current economy isn't exactly booming this last quarter. So, just what is a company like this worth anyway? They are demonstrating growth in a world where such demonstrations are less frequent than before.