IntriCon's 35% Gain Looks Sustainable

| About: IntriCon Corporation (IIN)

IntriCon (NasdaqGM: IIN) soared 35% Monday on news that it had been chosen to be the original equipment manufacturer (OEM) of hearing aids for hi HealthInnovations, a UnitedHealth Group (NYSE: UNH) business. IntriCon specializes in the manufacture and distribution of miniature and micro-miniature body worn devices. Its products serve medical health purposes, hearing and professional audio communications, including for security personnel.

This specific deal was effected because of IntriCon’s low-cost hearing aid. hi HealthInnovations indicated that research shows 75% of people who can benefit from hearing aids do not use them due to their high cost. The company indicates the market size at 36 million Americans. And while these hearing aids are lower cost, they are (according to the parties involved) high performing. The specific devices in this deal involve IIN’s new APT Open-in-the-canal (ITC) hearing aid platform. IntriCon employs nanotechnology in its products, thus offering tiny, ascetically pleasing products that use little power. The company will be producing in Indonesia by the end of 2011, keeping costs controlled barring any quality control or other complications during start up.

The stock dropped this past summer after reporting results that compared poorly against the prior year quarter, and sales were down. Even as it near simultaneously gained FDA approval for a health monitoring device, the shares plunged. This latest win seems counter to the company’s intention to fatten margins through proprietary sales, but it also should significantly help top line volume, thus appeasing recent concerns. The stock was up a dollar Monday on the news, to a $4 level that looks to have technical significance.

It’s hard to say what impact this business win will have upon the company’s results in detail, given the little information provided by the company, no readily available analyst research, and without spending significantly more time researching the company. It does appear to be part of an intermediate strategy that will help the company restore profitability in 2012, and so the $4 price reached Monday seems secure to me, with upside likely, especially with any new positive news.

Higher costs on successful R&D efforts weighed on profitability over the recent past, and so it looks as though IIN is positioned to reap some reward now, based on this brief study. Also, the company’s production facility in Indonesia should aid in gross margin expansion as well in coming quarters, again, barring any missteps. As an analyst, I could not offer a buy recommendation on the shares based on the amount research done to this point, but I can say that I have a favorable opinion based on what I know now, and that I believe Monday’s price gain will hold.

Monday's Stock Gainers

Percent Change

First Trust Strategic High (NYSE: FHY)


IntriCon (NasdaqGM: IIN)


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Pharmaceutical Product Development (Nasdaq: PPDI)


Meade Instruments (NasdaqCM: MEAD)


Oak Valley Bancorp (NasdaqCM: OVLY)


Global-Tech Advanced Innovation (NasdaqGM: GAI)


The Medicines Co. (NasdaqGS: MDCO)


57th Street General Acquisition (NasdaqCM: CRMB)


Emergent Biosolutions (NYSE: EBS)


Old Second Bancorp (NasdaqGS: OSBCP)


Valley Financial (NasdaqCM: VYFC)


Acura Pharmaceuticals (NasdaqCM: ACUR)


Orckit Communications (NasdaqGM: ORCT)


TF Financial (NasdaqGM: THRD)


Stewardship Financial (NasdaqCM: SSFN)


Newport Bancorp (NasdaqGM: NFSB)


EntreMed (NasdaqCM: ENMD)


ClickSoftware Technologies (NasdaqGS: CKSW)


Grupo Aeroportuario del Centro (NasdaqGS: OMAB)


Bioanalytical Systems (NasdaqCM: BASI)


Pointer Telocation (NasdaqCM: PNTR)


Hadera Paper (AMEX: AID)


Roberts Realty Investors (AMEX: RPI)


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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.