Merge Healthcare: Insiders Are Gobbling Up This Fast Growing Speculative $3 Stock

| About: Merge Healthcare (MRGE)

Former high flyer (the stock price was more than twice as high a few months ago) Merge Healthcare (MRGE) reported a solid quarter after the bell Tuesday. The solid results should get this fast growing medical imaging and analytics company back on track and also reward insiders who have been heavy buyers of the stock recently.

Key highlights from earnings report:

  • Revenue increased 13% Y/Y to just under $63mm. Revenues were a little over $2mm better than estimates.
  • Continued to execute against its strategy on getting more subscription based revenue, which now represent 15% of total sales. Recurring revenue is about 60% of revenue mix.
  • Earnings came in a penny better than expected.

4 additional reasons MRGE is a solid speculative play at $3 a share:

  1. Insiders have purchased over 500,000 shares since May. The four analysts that cover the stock have a median price target of $5 a share (ranging from $4.50 to $6 a share)
  2. The stock is selling near the bottom of its five year valuation range based on P/S, P/CF and P/B.
  3. MRGE has a very reasonable valuation for a high growth stock at just over 1 times annual revenues and around 10.5 times forward earnings, a huge discount to its five year average (31.3)
  4. The stock just bounced off long term technical support and has a solid technical floor at the $2.50 level (see chart).

(Click to enlarge)

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in MRGE over the next 72 hours.