Consistently Growing, Cash Rich Biopharma Play Still Has Upside

Aug.13.12 | About: Anika Therapeutics (ANIK)

It is getting harder to find bargains in a market that exists in a world of falling overall global growth as well as concerns around Europe and the "fiscal cliff". Finding stocks at a reasonable price that should grow regardless of these concerns should be a primary focus for growth investors. One cash rich, underfollowed biopharma stock that should do well regardless of what the coming months bring is Anika Therapeutics (NASDAQ:ANIK).

"Anika Therapeutics develops, manufactures, and commercializes therapeutic products for tissue protection, healing, and repair. Its products are based on hyaluronic acid, a naturally occurring biocompatible polymer found in the body." (Business description from Yahoo Finance)

Seven reasons ANIK is a solid growth play at $14 a share:

  1. The first thing one notices about this stock is its consistent revenue growth. It has grown sales at better than an 18% annual clip over the last five years. Analysts have it growing revenues between 13% to 15% in both FY2012 and FY2013.
  2. Due to increasing sales and improving margins, EPS is accelerating in the first two quarters of this year. The company made 14 cents a share in 1Q2012 versus 2 cents in 1Q2011 and 26 cents a share in 2Q2012 versus 17 cents a share in 2Q2011.
  3. Anika more than tripled its operating cash flow from FY2009 to FY2011 and has a solid balance sheet with over $25mm in net cash on its balance sheet (Around 15% of market capitalization)
  4. The stock is selling in the bottom third of its five year valuation range based on P/S, P/E and P/B.
  5. The stock is not covered by many analysts but the two analysts that do have price targets are at $18.50 and $21 on ANIK.
  6. Most of the company's sales are domestic. It has lots of opportunities to grow revenues internationally including Asia where it is just establishing a presence.
  7. Growth prospects for Anika seem underpriced given the stock has a five year projected PEG of under 1 (.59). Consensus earnings estimates for FY2012 and FY2013 have also ticked up over the past month.

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