If you visit your bank account officer, chances are she would recommend investing in bonds and other deposit products. Times are truly crazy. The fluctuations in the market will drive any risk manager into the edge of their seats.
But I still believe in investing in stocks. This is where you truly make money. It just becomes doubly hard to find that stock that can beat the market. It is during this time that we look for a growth stock.
Hi-Tech Pharmacal Co. (HITK) manufactures prescription and over-the-counter generic and branded pharmaceuticals in liquid and semi-solid dosage forms. The Company also manufactures sterile ophthalmic, otic, and inhalation products and provides sterile manufacturing contract services. Hi-Tech markets its own products under names such as H-T, Rx Choice, DiabetiDerm, and Steri-Optics. (Source: Bloomberg)
But I still believe in investing in stocks. This is where you truly make money. It just becomes doubly hard to find that stock that can beat the market. It is during this time that we look for a growth stock.
Hi-Tech Pharmacal Co. (HITK) manufactures prescription and over-the-counter generic and branded pharmaceuticals in liquid and semi-solid dosage forms. The Company also manufactures sterile ophthalmic, otic, and inhalation products and provides sterile manufacturing contract services. Hi-Tech markets its own products under names such as H-T, Rx Choice, DiabetiDerm, and Steri-Optics. (Source: Bloomberg)
The Generic drug industry are expected to experience a boom in the next five years, when many of the popular patented drugs are about to expire. In 2011, $15B of value in drugs will be off the patent cliff. In 2012, $33B of value in drugs will be open to the generic drug makers like HITK. In the next five years, a total of $133B of value in drugs sale would be up for grabs by generic drug makers in the United States alone. This will open a lot of opportunity for revenue growth for companies like HITK.
Hi Tech Pharmacal has a healthy balance sheet with a current ratio of 8 and $32M in cash. It has a current P/E ratio of 10.21 when sector's P/E is averaging at 15.53. It's 52 week range is from 18.68 to 44.58 and the trend is mostly upward, reflecting the continuing revenue growth of this company.
As of now, HITK has 16 products pending approval to the FDA which would spell $1B annual sales and another batch of 20 products that are about to be submitted to the FDA which would translate to $3B in annual sales.
HITK is more of a family managed business, with the Seltzer brothers (David and Ruben) holding around 22% of HITK shares. But this firm is not hounded by the weakness of the usual family business. They have a history of acting in the interest of the shareholders. In 2007, HITK acquired Midlothian Laboratories that resulted in declining sales. Most acquiring firms would choose to save face and justify their acquisition with empire building objectives. Instead, the Seltzer brothers decided to dispose of this firm, putting the value of the shareholders on top of their priority list.
Let's discuss some value metric that I obtained from the analyst Steven Roge. HITK's 5 year total EVA (economic value added) is $6.88 M , compared to $2.52M for Forest Labs and $1.40M for Teva and $154M for Perrigo. But HITK trades at a lower P/E ratio at 10, compared to the others. Perrigo, for example, has a P/E ratio of 25. Analysts forecast a 28% drop in earnings this year, and will proceed to have earnings growth of 13.7% in the following four years, on the basis of patent expirations of blockbuster drugs. At the end of five years, HITK is expected to have a P/E ratio of 16.
