4/12/12 Focus Stock – AngioDynamics Inc. (ANGO)

My focus stock this week is a small medical device maker, AngioDynamics (ANGO).

Through the week, five Form 4 filings were made by four insiders purchasing a total of just under 15,000 shares. Similar to JVA last week, generally we do not see small purchases like this hit our screens unless there are few filings on a particular day.

The filings showed up in our alerts for filings made on Tuesday and Thursday which totalled about $94,000 and $31,000 respectively. Another smaller filing was made on Wednesday as well. The purchases made on Monday included 5,000 shares by the CEO, Joseph Devivo.

Though the purchases were relatively small in size and dollar amount, when viewed in a larger context, a nice picture develops.

Let’s have a review of AngioDynamics using my research points.

1. How many shares were bought or sold in relation to the amount owned before the transaction(s)?

The four insiders who purchased shares during the week along with the amounts are shown below:

Who Date Shares Price Shares After Purchase
BUCCI VINCENT 4/9/2012 2000   11.80 31,846 (D)
DEVIVO JOSEPH 4/9/2012 5000 11.82 36,000
KAPUSTA MATTHEW C   4/10/2012 1000 11.40 16,000
GOULD KEVIN J 4/11/2012 2700 11.72 2,700
BUCCI VINCENT 4/12/2012 4000 11.82 4,000 (I)

View: Positive

2. Is the stock price near its recent or long-term high or low?

The stock hit a new 52-week low at $11.35 during the week as the insiders were purchasing. The stock has not traded below $12 since mid 2009. Looking at the 5-year chart, it is clear that $10 is hard resistance.

View: Positive

3. What do the fundamentals and earnings picture of the company look like?

The fundamentals are good for the most part. Of particular note is a cash hoard amounting to over $5.50/share. Book value is over $16/share, and there is minimal long-term debt.

The recent earnings report showed quarterly sales down 2% from prior year, gross margins down 1%, and for the quarter a loss of 7 cents/share attributed to one-time costs largely for restructuring. Removing the one time costs gave a profit of 9 cents/share compared to 15 cents/share a year ago.

I don’t like one-time costs and companies that brush them off and claim what their profit would have been without them. Too often, we see companies taking these one-time costs year in and year out, and then they’re no longer one-time costs, but the norm of how business is conducted. There’s a reason why it’s called “non-GAAP”, because it is not part of accounting standards. So, in our book, ANGO posted a loss of 7 cents/share for the quarter and that’s the end of the story.

View: Neutral

4. Are there any other items of interest that may raise red or green flags? 

a) Insiders routinely buy shares. Going through the history, purchasing shares is the norm, they don’t sell. This is very positive. It shows management has skin in the game, and are willing to invest more should they believe shares are undervalued.

b) The company is in the process of completing an acquisition that will solidify it’s position as number one or two in each of its key markets. More information can be found in the prior link to the earnings report press release. This is a link to the full 10-Q.

View: Neutral

Overall View: Somewhat Positive

The company has been clear with its 2012 earnings guidance that this will be a year for rebuilding. With the acquisition of Navlyst Medical, some restructuring, and investment in quality control, profit will be held back as a result. However, the investments being made now, should translate into sales and profit growth going forward. With reduced earnings through the remainder of 2012, I believe it will make 2013 very good as comparables for 2012 should be easy to beat showing excellent growth.

Aside from the short-term restructuring issue, the balance sheet is very strong with $5.68/share in cash, and a miniscule $7 million in long-term debt. Book value checks in at $16.33/share.

This is a company I personally like and would consider purchasing the stock. The simple reason is that the company manufactures/sells tangible products, it is profitable, it has an excellent cash cushion, and negligible debt. I like companies with strong balance sheets because it gives them flexibility to ride out storms, make prudent acquisitions, and shareholders have tangible value (can’t get any more tangible than hard cash).

Do you own ANGO? Have any thoughts on these insider purchases? Other thoughts? Let’s discuss it.


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