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Most investors prefer to avoid taking on a large amount of credit risk when considering new opportunities for their capital. With that in mind, we took a universe of stocks and looked at balance sheets for cash holdings that exceed more than four quarters of average operating expenses. With such large cash cushions, the companies in question could run operations (on average) for more than four quarters without earning any substantial profits.

With the results from that screen, we next looked for positive trends in accounts receivable, comparing growth in revenue to growth in accounts receivable. Since accounts receivable is the portion of revenue not yet received, and there is no guarantee the money will ever be received, the smaller the portion of revenue made up of receivables the healthier the company's total revenue.

We further screened for companies seeing faster growth in revenue than accounts receivable year-over-year, as well as accounts receivable comprising a smaller portion of current assets over the same time period.

For signs of investor confidence in these companies, we then searched for stocks that experienced significant net institutional purchases over the last quarter, representing at least 5% of share float. This indicates that institutional investors such as hedge fund managers and mutual fund managers expect these stocks to outperform in the future.

We were left with four companies on our list.

The List

For an interactive version of this chart, click on the image below. Average analyst ratings sourced from Zacks Investment Research.

Do the cash holdings and accounting trends of these companies make them a good investment? Use the list below as a starting point for your own analysis.

1. Anika Therapeutics Inc. (ANIK): Develops, manufactures, and commercializes therapeutic products for tissue protection, healing, and repair, utilizing hyauronic acid (HA) technology).

  • Market cap at $198.52M, most recent closing price at $14.18
  • Average quarterly operating expense over the last five quarters at $12.38M, vs. most recent cash and short term investments at $50.97M, implies a Cash / Avg. Operating Expense ratio at 4.12.
  • Revenue grew by 6.2% during the most recent quarter ($15.25M vs. $14.36M y/y). Accounts receivable grew by -13.06% during the same time period ($14.78M vs. $17M y/y). Receivables, as a percentage of current assets, decreased from 26.58% to 18.78% during the most recent quarter (comparing 3 months ending 2013-03-31 to 3 months ending 2012-03-31).
  • Net institutional purchases in the current quarter at 612.3K shares, which represents about 5.57% of the company's float of 10.99M shares. The top holders of the stock are Dimensional Fund Advisors LP (5.99%) and Wellington Management Company, LLP (5.26%).
  • ANIK has recorded great gains over the last month, when compared to its closest competitors. The stock returned 11.65% since 4/29/13, better than Gilead Sciences Inc. (GILD) and Biogen Idec Inc. (BIIB), which returned 9.24% and 5.20% during the same holding period.

ANIK reported Q1 2013 earnings earlier this month, emphasizing strong revenue (total revenue up 6% compared to Q1 2012) and a 60% increase in net income. Improved product gross margin was singled out as contributing to growth, improving from 52.9% to 66.6% (or 1,370 basis points) compared to the same quarter last year.

2. Fluidigm Corporation (FLDM): Engages in the development, manufacture, and marketing of microfluidic systems for growth markets in the life science and agricultural biotechnology (Ag-Bio) industries.

  • Market cap at $446.12M, most recent closing price at $17.55
  • Average quarterly operating expense over the last five quarters at $18M, vs. most recent cash and short term investments at $79.57M, implies a Cash / Avg. Operating Expense ratio at 4.42.
  • Revenue grew by 32.79% during the most recent quarter ($14.54M vs. $10.95M y/y). Accounts receivable grew by 3.07% during the same time period ($10.06M vs. $9.76M y/y). Receivables, as a percentage of current assets, decreased from 17.23% to 10.21% during the most recent quarter (comparing 13 weeks ending 2013-03-31 to 13 weeks ending 2012-03-31).
  • Net institutional purchases in the current quarter at 1.6M shares, which represents about 7.15% of the company's float of 22.39M shares. The top holders of the stock are Jennison Associates LLC (13.55%) and Primecap Management Company (11.17%).
  • FLDM has a higher than average projected earnings growth rate over the next 5 years (1484.0%). This is higher than the likes of Waters Corp. (projected EPS growth over next 5 years at 10.15%) and Garmin Ltd. (projected EPS growth over next 5 years at 7.34%).

FLDM produces the BioMark HD System, which uses nanofluidic technology to rapidly conduct polymerase chain reaction (PCR) tests, and recently the Saskatchewan Disease Control Laboratory (SDCL) has chosen this system to be a key component of its public health laboratory in the province.

3. Bottomline Technologies Inc. (EPAY): Provides electronic payment, invoice, and document automation solutions to corporations, financial institutions, and banks worldwide.

  • Market cap at $1.02B, most recent closing price at $27.03
  • Average quarterly operating expense over the last five quarters at $62.49M, vs. most recent cash and short term investments at $284.04M, implies a Cash / Avg. Operating Expense ratio at 4.55.
  • Revenue grew by 16.49% during the most recent quarter ($64.44M vs. $55.32M y/y). Accounts receivable grew by 1.71% during the same time period ($46.98M vs. $46.19M y/y). Receivables, as a percentage of current assets, decreased from 25.72% to 13.59% during the most recent quarter (comparing 3 months ending 2013-03-31 to 3 months ending 2012-03-31).
  • Net institutional purchases in the current quarter at 1.9M shares, which represents about 5.46% of the company's float of 34.82M shares. The top holders of the stock are T. Rowe Price Associates Inc. (9.32%) and Franklin Resources, Inc. (6.67%).
  • EPAY has recorded solid gains over the last month, when compared to its closest competitors. The stock returned 4.36% since 4/29/13, better than Automatic Data Processing, Inc. (ADP) and Citrix Systems, Inc. (CTXS), which returned 4.04% and 2.06% during the same holding period.

The company's earnings for the third quarter ending on 3/31/2013 included a 17% increase in revenue compared to the same quarter last year, while revenues specifically from subscriptions and transactions increased by 41%. The quarter saw net loss per share of $0.10 while gross margin during this period was $34.2M.

4. United Therapeutics Corporation (UTHR): Engages in the development and commercialization of therapeutic products for patients with chronic and life-threatening diseases in the United States and Internationally.

  • Market cap at $3.3B, most recent closing price at $66.35
  • Average quarterly operating expense over the last five quarters at $129.11M, vs. most recent cash and short term investments at $670.64M, implies a Cash / Avg. Operating Expense ratio at 5.19.
  • Revenue grew by 20.04% during the most recent quarter ($245.14M vs. $204.21M y/y). Accounts receivable grew by 13.68% during the same time period ($101.35M vs. $89.15M y/y). Receivables, as a percentage of current assets, decreased from 15.53% to 12.% during the most recent quarter (comparing 3 months ending 2013-03-31 to 3 months ending 2012-03-31).
  • Net institutional purchases in the current quarter at 2.6M shares, which represents about 5.68% of the company's float of 45.78M shares. The top holders of the stock are FMR, LLC (8.92%) and BlackRock Advisors, LLC (5.42%).
  • The company has reported strong earnings growth over the last year, with EPS growing by 56.22%, higher than competitors like Allergan Inc. (EPS growth over the last year at 18.57%) and Forest Laboratories Inc. (EPS growth over the last year at 1.56%). Compare performance over the last year:

In conjunction with Pfizer (PFE), UTHR has recently partnered with Organovo, and while details are scarce, Organovo is known to be exploring the use of 3-D printing technology to produce human cells, such as those for the liver, as reported by The Motley Fool.

*Institutional data sourced from Fidelity, accounting data sourced from Google Finance, all other data sourced from Finviz.

Source: 4 Cash Rich Small And Mid Caps Favored By Institutional Investors