This $4.50 Drug Stock Has Good Growth Prospects Ahead Of It

| About: Lannett Company, (LCI)

Domestic job and economic growth are anemic and will probably continue to be so for the foreseeable future. There are myriad reasons for this including the budget deficit that needs to be addressed, the continuing problems in Europe and increasing government regulations as well as slow growth policies. This is little hope for any of these primary headwinds to be addressed in the short term. Finding stocks that can grow much faster than the overall economy is a key ingredient to forming a portfolio that will outperform the market in this environment. One small cap equity that seems to fit that bill is Lannett (NYSEMKT:LCI).

Lannett Company develops and manufactures generic versions of branded pharmaceutical products in the United States. It has a market cap of just over $125mm.

7 reasons LCI is a good growth play at $4.50 a share:

  1. Cannacord Genuity initiated the shares Friday as a "Buy" with a $7 price target.
  2. The two other analysts that cover the stock have price targets on LCI of $6 and $7 a share on LCI.
  3. The company has robust balance sheet with some $25mm in net cash on the books (Approximately 20% of market capitalization).
  4. Revenue growth is projected to clock in the low double digits for both FY2012 and FY2013. The company has also beat earnings estimates each of the last four quarters.
  5. Earnings are expected to double from 16 cents a share in FY2012 to the 31 cents a share analysts expect the company to make for FY2013.
  6. The stock is selling for just over 14x forward earnings, half of its five year average (28.1).
  7. Cannacord cited the company's robust pipeline as a reason for its rating. It is projecting 36% annual EPS growth through 2017.

Given Lannett's good growth prospects, pipeline of pain management therapies and small market capitalization; it would seem to be a logical acquisition target for a bigger player in the space.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in LCI over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.