Rambus, Inc. is a U.S.-based technology licensing company. The company focuses on creation, design, development and licensing of patented innovations, technologies, and architectures to digital electronics products and systems, which are foundational to nearly all digital electronics products. RMBS lost 1.37% and closed at $5.76 on February 20, 2013. RMBS had been trading in the range of $3.78-$8.10 in the past 52 weeks. RMBS has a beta of 1.58.
Rambus had boosted Q1, 2013 revenue outlook. With the addition of a one-time payment license agreement, Rambus revised its revenue guidance for the quarter to be between $65M to $69M, up from the previous guidance of $58M-$63M. On February 19, 2013, RMBS signed a patent agreement with LSI Corporation (LSI), allowing LSI Corporation to include Rambus patented innovations in all its products. According to the report,
In addition, the two companies have settled all outstanding claims, including pending disputes related to Rambus patented innovations. This patent license agreement will terminate in 2018.
Fundamentally, RMBS has an enterprise value of $555.44M and a market cap of $641.27M. RMBS has a total cash of $203.33M and a total debt of $147.56M. RMBS has a book value of $2.89 per share. RMBS has a stronger revenue growth (3-year average) of 29.9, compared with the industry average of 10.9.
Solta Medical Inc.
Solta Medical, Inc. designs, develops, manufactures and markets professional and consumer energy-based medical device systems for aesthetic applications. SLTM's systems are cleared by the United States FDA for dermatological procedures performed in the physician led, professional assist, and personal care markets. SLTM declined 2.04% and closed at $2.40 on February 20, 2013. SLTM had been trading in the range of $2.32-$3.53 in the past 52 weeks. SLTM has a high beta of 2.55.
SLTM expects FY2013 revenue of $182-191 million, versus the consensus of $163.91 million. SLTM provided its preliminary financial outlook for 2013, which includes the pending acquisition of Sound Surgical Technologies as follows: Revenue for 2013 is expected to grow by 26%-32% and be in the range of $182M-$191M, compared with the full-year 2012 revenue of $144.5M. Non-GAAP gross margin, excluding non-cash amortization charges, non-cash stock-based compensation charges, severance costs, and acquisition-related adjustments, is expected to be in the range of 65%-68% for the full year 2013. Non-GAAP gross margin for the full year 2012 was 66%.
Non-GAAP operating income, excluding non-cash amortization charges, non-cash stock-based compensation charges, severance costs, and acquisition-related adjustments, is expected to be in the range of $13M-$16M for the full year 2013. Non-GAAP operating income for the first six months of 2013 is expected to be in the range of $3M-$4M as SLTM integrates its acquisition of Sound Surgical Technologies. Non-GAAP operating income for the full year 2012 was $8.4 million.
There are a few positive factors for SLTM:
- Higher revenue growth (3-year average) of 27.0 (vs. the industry average of 4.0).
- Lower debt/equity ratio of 0.2 (vs. the industry average of 0.4).
- Lower P/B and P/S of 1.5 and 1.1 (vs. the industry averages of 2.5 and 2.1)
- SLTM generates an operating cash flow of $6.63M with a levered free cash flow of $31.16M.
Express Scripts Holding Company
Express Scripts Holding Company (ESRX) provides a range of pharmacy benefit management services in North America by offering healthcare management & administration services such as managed care organizations, health insurers, workers' compensation plans and government health programs. ESRX increased 0.55% and closed at $57.29 on February 20, 2013. ESRX had been trading in the range of $49.79-$66.06 in the past 52 weeks. ESRX has a beta of 1.08.
ESRX reported Q4, 2012 EPS of $1.05, beating analysts' estimate by $0.01. Revenue for Q4 was $27.41B, which was higher than the consensus estimate of $27.24B. ESRX issues strong FY2013 EPS of $4.20-$4.30, versus the consensus of $4.20.
There are a few positive factors for ESRX:
- Higher revenue growth (3-year average) of 28.0 (vs. the industry average of 6.2)
- ESRX generates an operating cash flow of $4.74B with a levered free cash flow of $5.64B.
- Strong liquidity with 5.80M 30-day average trading volume.
Oppenheimer reiterated the Outperform rating on ESRX and raised its target price from $60.00 to $62.00. Oppenheimer noted,
After opening up ~7%, ESRX gave back much of its gains, despite what we considered a fairly benign call. We believe the market is focused on increased competition and ensuing pricing pressure. While we harbor the same concerns, we believe the competitive landscape is less threatening with UNH and CTRX than when MHS was pricing to fill its mail facilities. In terms of 2014, we expect CTRX to pick off a few clients but do not see a major shift in share. We also believe the company's strong cash flow will support double digit EPS growth. We reiterate our Outperform rating and increase our PT to $62 from $60.
In short, while all three companies have a higher-than-industry-average growth rate and have issued strong outlook, ESRX has the better mix of high growth, medium stock volatility, positive income, and strong liquidity. RMBS and SLTM may not be suitable for investors who are concerned about negative EPS.
Note: All prices are quoted from the closing of February 20, 2013, and all calculations are before fees and expenses. Investors and traders are recommended to do their own due diligence and research before making any trading/investing decisions.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.