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CryoLife Inc. Message Board

  • dlhild Mar 19, 2013 11:37 PM Flag

    Management Metric Analysis:

    In early June 2012 CRY stock was in the ball park range of $4.50. On March 15, 2013 CRY stock is around $5.90. Back during the June 2012 period CRY settled their litigation issues with various parties. Clearly someone, Salverson perhaps, strongly suggested to Steve he should get his act together and get out of the litigation business. Steve listened.

    Per my estimates, the pre-tax cost of litigation had been roughly $3.5 million annualized. Apply a 37% tax rate and getting out of the litigation business by itself generated roughly $2.2 million in net operating income. Divide this by 27.7 million shares O/S and the direct effect on earnings would be roughly $0.08. Apply a 20X P/E to the $0.08, and the stock should have appreciated about $1.50-$1.60, simply by getting out of the litigation business.

    CRY stock was about $4.50 in early June 2012. Today CRY stock around $5.90. Hence, by late Sept. 2012 CRY stock finally reflected the full effect of getting out of the litigation business. Since the beginning of Oct. 2012 to the present, CRY stock has jumped around some, but it is essentially still where it was in late Sept. of 2012. So boil it down, we have recently had 6 months of sideways action.

    The S&P was roughly 1,280 in early June 2012. Presently the S&P is around 1,560. This means the S&P has moved up 22% since early June of 2012. It doesn't appear that CRY stock has participated in any of this 22% run up. Hence, it does not appear that CRY shareholders received any benefit from market correlation generally.
    To me this means the market place is taking a “wait and see” approach toward CRY’s stock price. It appears to me that had CRY benefited in line with market correlation, that the CRY stock price would be roughly $1.00 higher.
    I really don't get it. The most obvious reason for CRY's 17 years of “under performance” seems to be that CRY’s EXECUTIVE MANAGEMENT IS NOT EFFECTIVE.

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    • I like stocks that have been out of favor for a long time and have done extremely well with that approach.

      My favorite example was Telex in 1982. While Telex made the headphones you see NFL coaches wear their main product way back when was IBM compatiable terminals before personal computers became popular. The stock was all the rage in the late 1960s. Telex got really hurt from competition during the 1970s and was only selling in the 5s in March of 1982 when I bought a couple thousand shares. This was a period of very high interest rates and Telex leased out most of their terminals for 3 years and wrote off all the cost during that time period. What happened was Telex was able to release those terminals after the original leases expired at almost zero cost! By 1985 Telex was earning $5 per share and the stock when to $100 per share. It was later bought out at $50 per share. I sold my stock in 1983 after I got long term capital gains in the 25s.

      The point is a stock price can be low while the company builds value that isn't recognized by the market. I think that may be the case with CRY.

      Do your own due diligence.

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