PBSV Boosts Margins and Expands Markets
OTC:PBSV
READ THE FULL PBSV RESEARCH REPORT
Pharma-Bio Serv (OTC:PBSV) announced fiscal 3Q 2023 results. The headline showed that earnings per share of $0.02 were inline with our estimates, driven by the continued impressive improvement in gross margin on sales revenue by another 6.4% in the quarter just ended July 31. Revenues of just over $4.6 million were also inline with our estimates and we saw consulting revenues from Europe more than double from the second quarter of last year, continuing the recent trend of expansion of the European markets, which is encouraging to us as Pharma-Bio Serv looks to continue to expand its global footprint. The company also showed improved its US revenues and believe this is a reflection of management's commitment to look for opportunities in new market and industries.
Additionally, the balance sheet continues to look solid. At first glance it appears that the company’s cash balance has decreased from $14.4 million in October 2022 to just under $3.0 million. As we’ve discussed before, the company has done something with that “missing” cash that we believe is much smarter and will benefit the company and shareholders—management has decided to invest just over $11.7 million in US Treasury Bills. With recent yields on T-bills between 4-5%, this move allows the company to hold cash equivalents that are actually earning a nice yield, while remaining safe and liquid—a win, win for investors and the company and adding to the revenue for Pharma-Bio Serv.
A reminder that the company continues to have shareholders’ best interest in mind in our view, as management recently approved a $0.075 dividend for shareholders as of March 29, 2023, which continues management’s dedication to returning cash to shareholders and paid out on April 14, 2023. The company has also authorized a share buyback program that remains in force, with just over 450,000 shares being repurchased to this point, with the potential for another 1.5 million shares to be repurchased in the future—presenting another upside potential for investors.
With the meeting of earning estimates in the most recent quarter, we are maintaining our full-year earnings estimate, but we are fairly optimistic that they will be able to best those estimates if current trends in expense containment, cash management and domestic and foreign market growth can be maintained. The pharmaceutical business is running at full speed again after the sharp Covid-related slowdown and the backlogs that resulted among regulators have been largely relieved. We believe this continues to bode well for the demand for services provided by Pharma-Bio Serv will grow as more companies look to navigate their products through the sometimes complicated and opaque regulatory environment around the globe.
The company’s revenues from Puerto Rico have declined over the past year and we believe this revenue will take some time to recover. The country continues to be plagued by power problems and political roadblocks appear to be impeding improvement and recovery. It is a credit to Pharm-Bio Serv that the company has been able to overcome these issues and more than offset the loss of revenue from Puerto Rico by expanding business in other markets.
That ability to pivot and expand its reach, along with the rapid growth seen in the European markets and a growing US business with the potential to expand lead us to have a positive view on PBSV stock. We suggest investors who are looking for a steady investment with a consistent dividend and with management dedicated to shareholders take a look at PBSV.
SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR.
DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks SCR provides and Zacks SCR receives quarterly payments totaling a maximum fee of up to $40,000 annually for these services provided to or regarding the issuer. Full Disclaimer HERE.
