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CryoLife Inc. Message Board

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  • dlhild May 5, 2010 2:20 PM Flag

    how low does CRY go...

    IMO, not necessarily ridiculous for several reasons:
    1. The S&P 500 trailing P/E is around 20x. Historically, the average is 16x. Market cycle lows generally occur below 10x, although a person only sees about 3 market lows during their adult life. The point is this market is still general over valued, and when it hits bottom...I'm guessing in another 2 to 8 years...CRY will come down too. This correction is inevitable, it is just the way long term secular trends work.
    2. CRY has not demonstrated any ability to consistently increase their EPS. Quite hit and miss. Hence a lower P/E is perhaps warranted.
    3. Future cash flow from BioGlue is uncertain. Patents expire 2012/2013. The product may be dated too. Also, probably more competition coming into the BioGlue space. BioGlue cash flow could fall off a cliff, and remember that BioGlue is CRY's cash cow.
    4. HemoStase sale outlook is uncertain, again warranting a lower P/E.
    5. Tissue, which is over half their sales, is a low margin, highly regulated, high fixed cost business that generates very little cash flow. This acts to pull down CRY's P/E.

    If CRY could bring certainty to more aspects of their business, sell more high margin product (e.g. BioFoam, HemoStase, other), and get out of the litigation business then perhaps a higher P/E's would be warranted.

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