PBSV: A Consistent Performer with Impressive Dividend
OTC:PBSV
READ THE FULL PBSV RESEARCH REPORT
Pharma-Bio Serv (OTC:PBSV) announced 2Q 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 5% in the quarter just ended April 30. Revenues of just over $4.6 million were slightly below our estimates but above 2Q 2022 levels 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.
Additionally, the balance sheet continues to look solid. At first glance it appears that the company’s cash balance has decreased from $14.5 million in October 2022 to just over $8.0 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 $5.5 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.
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 beat those estimates if current trends in expense containment, cash management 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, but we view this as a temporary development due in large part to the country’s continued struggle to recover from Hurricane Maria in 2017, resulting in continuing power outages on the island. According to the nonpartisan think tank Center for a New Economy (and reported by ABC News) the Puerto Rican government has approved $12 billion for electric grid reconstruction, but only $88 million worth of projects had been completed as of early March 2023. The US recently announced it was sending mega generators to the island, which we believe, along with continued local efforts, will result in an improvement in the Puerto Rican economy in 2023 as the year progresses, which should help Pharma-Bio Serv recover at least some of the lost revenue.
That potential recovery, along with the rapid growth seen in the European markets, along with a steady US business with the potential to grow 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.
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