Pacific Healthcare Is A Growing Company You've Never Heard Of

Nov.15.13 | About: Pacific Health (PFHO)

Pacific Healthcare Organization (OTC:OTCQB:PFHO) filed their 10-Q this morning, and did well to validate my previous arguments that this low float (167k according to Yahoo!) stock with traditionally conservative management could be a major diamond in the rough. I'm going to run through my past presentation of why PFHO is a winner, then I'm going to show this morning's 10-Q results and analysis.

From Pacific Healthcare Organization's website:

Pacific Healthcare Organization, Inc., through its subsidiaries, engages in managing and administering health care organizations (HCOs) and managed provider networks in the state of California. The HCOs are networks of medical providers established to serve the workers' compensation industry.

Pacific Healthcare Organization, Inc., through its two HCOs, offers injured workers a choice of enrolling in an HCO with a network managed by primary care providers requiring a referral to specialists; or a second HCO, where injured workers do not need any prior authorization to be seen and treated by specialists. The company was formerly known as Clear Air, Inc. and changed its name to Pacific Healthcare Organization, Inc. in January 2001. Pacific Healthcare Organization, Inc. was incorporated in 1970 and is based in Newport Beach, California.

PFHO has traded exceptionally well over the past couple of years - offering investors many multiples on their investment, depending on how far back they first invested. Over the last year alone, PFHO has offered 190% gains. Don't let that deter you, I think this one is still just getting started.

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So, how did Q3 fare for the company? Excellent growth, as expected.

Quarter

EPS

Revenue

Enrollees

$ per Enrollee

Q3 '13

$0.42

$1,703,570

548,000

3.11

Q2 '13

$0.36

$1,592,608

550,000

2.90

Q1 '13

$0.25

$1,384,110

537,000

2.57

Q4 '12

$0.23

$1,311,000

516,000

2.54

Q3 '12

$0.23

$1,326,801

442,000

3.00

Q2' 12

$0.23

$1,123,911

403,000

2.79

Q1 '12

$0.20

$1,065,457

388,000

2.75

Q4 '11

$0.06

$803,893

370,000

2.17

Q3 '11

$0.09

$864,397

348,000

2.48

Q2 '11

$0.06

$613,677

318,000

1.93

Q1 '11

$0.03

$549,826

288,000

1.91

Q4 '10

$0.05

$542,550

286,000

1.90

Q3 '10

-$0.01

$379,151

254,000

1.49

Q2 '10

-$0.04

$346,400

245,000

1.41

Click to enlarge

While enrollees are down slightly, you can see that management continues to focus on the EPS and growing the $ per enrollee. It appears that enrollees are stagnant due to needed expansion from the company, which it looks like they are addressing, according to its 10-Q.

We currently have planned certain capital expenditures during the remainder of fiscal 2013 to accommodate our growth. We do not anticipate this will require us to seek outside sources of funding.

and

We expect current levels of general and administrative expenses to increase starting with the first quarter of 2014.

For this management team, which I know to be extremely conservative and extremely focused on generating value through the EPS, these expenses would not be increasing if the company wasn't absolutely ready to grow and take on these changes.

Additionally, I don't expect that these increases will have an overtly negative effect, as I'm confident PFHO's management would not overspend a penny more than necessary.

In addition, the company's liquidity continues to increase:

As of September 30, 2013 we had cash on hand of $933,109 compared to $479,674 at December 31, 2012. The $453,435 increase in cash on hand is primarily the result of increases in our net income, depreciation, accrued expenses, and accounts payable, and decrease in receivable other, partially offset by increases our accounts receivables, prepaid expenses, and decreases in our deferred rent expense , unearned revenues, purchase of furniture and equipment and payments of our obligation s under capital lease

Here's the three charts you need to see to sum up the direction that PFHO continues in:

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I continue to think that PFHO is a diamond in the rough that very few people have heard of. When the company is noticed, the low float assures that the price could potentially continue to increase quickly. With large bid/ask spreads and continued growth, I'm holding my PFHO long alongside the insiders of the company and waiting for the company to continue to execute.

Best of luck to all investors.

Disclosure: I am long OTCQB:PFHO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.