Why I Picked Up BioLase Technology Heading Into The Weekend

Mar.16.12 | About: Biolase, Inc. (BIOL)

For those investors looking for high risk/high reward plays, the small cap space provides numerous opportunities. Companies with high growth and that are going through a transition from losing money to making money in the next 12-18 months are one area I like to dabble in as these companies can provide lucrative returns if they perform to plan. One stock that falls into this category is below.

7 reasons BIOLASE Technology (BLTI) is a speculative buy at $2.50 a share:

  • The company is expected to go from a net loss to positive earnings over the next two years. The company lost 15 cents a share in FY2011, but analysts expect 2 cents a share in earnings in FY2012 and 12 cents in FY2013.
  • Insiders are holding tight and the company has had net insider buying over the last year.
  • The stock is significantly below analysts' price targets. The three analysts that cover the stock have a consensus price target of $5.50 with the lowest price target being $5 a share.
  • The company has net cash on its balance sheet.
  • The company is experience rapid revenue growth. Analysts expect sales growth of just under 20% for both FY2012 and FY2013. It grew revenue 87% in FY2011.
  • Its new Waterlase system is selling well and made up 60% of sales in FY2011. The company also has a strong international business that makes up a third of sales.
  • The stock, which was just under $7 a share less than a year ago, looks like it is bottoming and has technical support at these price levels (See Chart).

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Disclosure: I am long BLTI.