With the market acting a little more reasonable today, I wanted to find a stock that fit my criteria that I could share with all of you. Going to my usual ‘first step’ in identifying stocks, I noted that Immucor (BLUD) had made the list of top % gainers on the Nasdaq today, where it is currently trading at $25.78, up $2.17 or 9.19% on the day. I do not own any shares of Immucor nor do I have any options.

I use the term “revisit” on this entry because Immucor is what I like to call an ‘old favorite’ of mine, having reviewed it previously on Stock Picks Bob’s Advice on April 6, 2006, almost two years ago. At that time the stock was trading at $30.76/share. However, Immucor split its stock 3:2 on May 16, 2006, making the effective pick price actually $20.51. Thus, with the stock trading currently at $25.78, this represents an appreciation of $5.27 or 25.7% since the stock was first discussed on this blog.

Let’s take a closer look at this stock once again and I will share with you why I have decided.

IMMUCOR (BLUD) IS RATED A BUY

First of all,

What exactly does this company do?

According to the Yahoo “Profile” on BLUD, the company

“…together with its subsidiaries, develops, manufactures, and sells a range of reagents and automated systems. Its products are used primarily by hospitals, clinical laboratories, and blood banks in various tests performed to detect and identify certain properties of the cell and serum components of human blood prior to blood transfusion.”

How did they do in the latest quarter?

As is often the case on this blog, Immucor just announced 3rd quarter 2008 earnings yesterday after the close of trading, and it was this announcement that pushed the stock higher in trading today!

For the quarter ended February 29, 2008, revenue came in at $67.0 million, up 17% from 57.1 million during the same period last year. Net income for the quarter was $19.3 million, up 28% from the $15.0 million in the same quarter a year earlier. This worked out to $.27/share this year vs. $.21/share last year.

From my perspective these were solid results. But more important than earnings to a stock performance is what the expectations were on these results, and how the company did relative to these expectations. In fact, the company beat expectations in the quarter with net income of $.27/share when analysts polled by Thomson Financial were expecting $.22/share.

What about longer-term results?

If we review the Morningstar.com “5-Yr Restated” financials page on BLUD, we can see that the company has done a superb job with its underlying fundamentals, with revenue growing from $99 million in 2003 to $224 million in 2007 and $244 million in the trailing twelve months (TTM). During this time earnings have increased from $.28/share (except for a dip to $.18/share from $.28/share beetween 2003 and 2004), to $.85/share in 2007 and $.95/share in the TTM. No dividends are paid.

Outstanding shares have been stable at 64 million in 2003, increasing only to 68 million in the TTM.

Free cash flow has been positive and essentially growing from $35 million in 2005 to $55 million in the TTM. The balance sheet is solid with $138 million in cash which by itself can easily cover both the current liabilities of $43.1 million and the long-term liabilities of $15.7 million combined. Calculating for the current ratio, the total current assets of $238 million, divided by the current liabilities of $43.1 million yields a figure of 5.52, well above the level of 2.0 considered by some to be an indication of financial health.

What about some other valuation numbers?

Looking at Yahoo “Key Statistics”, we can see that the company has a market capitalization of $1.8 billion, still considered a ’small cap stock’ since it is under the $2 billion level.

The trailing p/e works out to 27.26 with a forward p/e (fye 31-May-09) estimated at 27.70. However, this doesn’t quite jive with the PEG of 1.03 (5 yr estimated) which suggests that earnings ought to be estimated at growing at a 25% rate.

Checking the Fidelity.com eresearch website, we find that valuation is a tad rich as measured by the Price/Sales (TTM) ratio which for BLUD works out to a level of 6.72 relative to an industry average of 5.85. In terms of profitability, Fidelity calculates the Return on Equity (TTM) at a level of 29.27%, ahead of the industry average of 20.46%.

Finishing up with Yahoo, there are 69.97 million shares outstanding with 68.92 million that float. Currently, as of 2/26/08, there were 8.41 million shares out short yielding a short ratio of 10.8 or 12.2% of the float. I have been using my own idiosyncratic cut-off of these ratios of 3 days suggesting that this is quite a load of shares out short which might expain today’s rise in stock price if the stock was subject to a short squeeze.

As I noted above, no dividend is paid and the last stock split was on May 16, 2006, when the stock split 3:2.

What does the chart look like?

Of all of the measures of this stock, the appearance of the “point & figure” chart from StockCharts.com gives me the greatest pause. We can see a beautiful run for this stock from a low of $3.25 in February, 2003, to a peak of $39 in October, 2007. However, since March, 2008, the stock broke through support at $28, dipped to a low of $17.50, and is fighting back to prior support levels. I would like to see the stock trading above $34 before I would be ready to give this stock an ‘all clear’!

Summary: What do I think about this stock?

Needless to say, I like this stock a lot. I think it is likely to be recession-resistant in the medical technology field. They reported great earnings that beat expectations and have been steadily reporting terrific financial results for the past five years at least! Valuation is reasonable with a p/e in the 20’s and a PEG just over 1.0. Price to Sales was a bit rich on analysis, but the Return on Equity suggests solid profitability. Their balance sheet is superb, and with a lot of shares out short there could well be a few short-sellers scrambling to buy shares if the stock rise continues!

Now, if I only had a signal to be buying stock!

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