Motley Fool just released this great article about PMTI. They are right on the mark and PMTI is WAY oversold and a huge BUY based on all the great news and strength in the company, especially with the J&J and Gillette stuff on the horizon.
Palomar's Parallax View
By Rich Duprey
February 13, 2007
Winning lawsuits can drive your revenues higher, but it might not do the same for your stock price. Just ask aesthetic laser maker Palomar Medical Technologies (Nasdaq: PMTI). It's been challenging the entire industry with patent-infringement lawsuits -- and winning. Yet it's still seen its stock price drop by more than 15% since its earnings release late last week.
Revenues for the quarter were up 82%, on the strength of back royalty payments made after Palomar won patent lawsuits against competitors Cynosure (Nasdaq: CYNO), Cutera (Nasdaq: CUTR), and Laserscope, which was recently acquired by Iridex (Nasdaq: IRIX). These companies paid Palomar a cumulative $26.2 million. Without those gains, product revenues rose by just 39% from last year.
A 39% increase is a pretty significant achievement, but it's just not the 82% that the earnings statement makes it seem. And speaking of earnings, those were up nearly 300% on a GAAP basis -- but there's some math you need to do here, too.
Because of the huge influx of cash the company received, it employed prior-year net operating loss carryforwards, thus enjoying $6.8 million in non-cash benefits from income taxes. Excluding those benefits, Palomar would have earned $7.9 million, or $0.39 per share, lagging analysts' expectation of $0.46 per share.
That's why the stock tumbled more than $4 per share the day after results were announced, and an additional $3 per share in the days afterwards. Palomar is a leading laser maker, but investors weren't seeing the business quite as laser-perfectly as they had before.
I don't think they're viewing the situation accurately. When you want to make a mark with a ruler, but you view the point from an angle, it's actually slightly offset from where you really want to it to be. That's called a parallax view. When you simply look at Palomar via its earnings release, and subtract all the bells and whistles that went with it, you're really getting a parallax view of the situation.
Palomar has two major product agreements in place with both Procter & Gamble (NYSE: PG) and Johnson & Johnson (NYSE: JNJ) to develop home-use lasers.
In December, it received FDA clearance to sell a home-use hair-removal device, and it's moving on to the next phase of development with P&G's Gillette. Its agreement with J&J involves reducing or reshaping cellulite, reducing the appearance of skin aging, and reducing or preventing acne. Rather than having to go to a clinic or to doctors for these procedures, consumers will be able to perform them in the privacy of their own homes. For Palomar, these should be huge opportunities.
Looking at the lawsuit results alone, and comparing them to analyst projections, skews your view of the situation. The potential of those consumer product agreements -- admittedly, in the future -- will be driving growth for Palomar. I'd consider the selloff in the stock way overdone.
Regarding the following this is incorrect-
"Because of the huge influx of cash the company received, it employed prior-year net operating loss carryforwards, thus enjoying $6.8 million in non-cash benefits from income taxes. Excluding those benefits, Palomar would have earned $7.9 million, or $0.39 per share, lagging analysts' expectation of $0.46 per share.
That's why the stock tumbled more than $4 per share the day after results were announced, and an additional $3 per share in the days afterwards. "
This is not correct, the COMPANY says a number of the estimates included in the $.46 have the one time $10+ million Q4 back royalty payment in there since it woud be a fact when reported and it was known ahead of time, but some analysts didn't have it in since it was nonrecurring. Different strokes for different folks. If you pull the $10 million out of the estimates that had the back royalty in, then the consensus becomes $.37 - $.38. vs. the $.39 reported. So the Company BEAT estimates on an Apples to Apples basis. It's a fact. Call the comopany.
agreed 100 % ! I know PMTI for 12 years-plus now and they do it !
What the shorts are creating is nonsense; they have their fun - but only shortly.
The stock will move quickly to 50-plus short-term; there is now even too much risk the company is taken over for US $ 60/70-plus. There is real interest to do so.
Let�s wait for the short-interest-figures based on the 15th february announced at th 29th.....I think we see 5,2 - 5.5 mio shares short ! Great - super basement for a srew ! or a squeeze......
I hate this new format. I have been posting for 5-6 years. Anyway, PMTI has a triple threat in the market but if they were so adept in marketing medical technology, why did it take 12 year to do it?
Where are the bugs in this PMTI program? Yes there are bugs. If I were PMTI I would get cracker jack sales managers and start performance based sales territory incentives. Now they are the toast of the town they should be able to attract a more experienced medicial device sales organization. Leave the rest to the lawyers and Co.