Almost a year ago when I wrote an article about Pharma-Bio Serv (OTCQB:PBSV) entitled Pharma-Bio Serv: 62% Upside Based On Last Earnings Results Alone. Little did I know the phrase "last earnings results alone" would literally occur. You see PBSV did indeed run 62% and actually peaked out three months later at 65.5% but then has been crashing from there.
At the time, my thinking for the target was based on the reported results for the most recent quarter. I had stated, "PBSV clearly has the sales, earnings and cash to demand a much higher share price, possibly 62% higher than Friday's close. A 62% gain over Friday's close would bring the share price to $2.45 per share. With annualized earnings of .24 per share as of this last reported quarter, that would be a PE just over 10."
Yes, the stock did run to $2.50 on anticipation that those earnings were sustainable especially in light of company-implied forecasts with statements such as, "Our growth is a testament to our ability to continue to expand our US market base and increase our Lab services business." The company and the market were wrong.
The net income peaked that quarter at $1.4 million and has gone steadily down each quarter sequentially since. Flash forward a year and the most recent quarter was a disaster in comparison to the year-ago quarter that got me excited. Revenue got chopped 20.3%, net income crashed 79%, and there wasn't too much optimistic language this time around.
CEO Elizabeth Plaza stated, "We remain steadfast in our commitment to executing on our strategic initiatives to drive growth." It's a very bland statement that suggests they don't have anything solid yet in the near future and revenue and net income could continue to decline. Pharma-Bio said that the declines were due to a decline in project revenue from Puerto Rico, United States, and Europe. In other words, just about everywhere which makes it hard to blame any outside entities.
Pharma-Bio is now cheaper than it was a year ago, but I see no reason to jump on board yet until there is some evidence of stability in revenue and earnings. Right now the stock price isn't the only falling knife -- sales and net income are too apparently. I will remain on the sidelines indefinitely.
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