Psychemedics: An Undervalued Hair Tester, No Matter How You Cut It
- Recent price action has left shares of Psychemedics off 52-week highs and trading below their 200-day moving average.
- This may have to do with the company's underperformance in recent quarters, as earnings dipped from additional costs associated with an expansion into Brazil.
- Depending on the size of the Brazilian truck fleet size, Brazil's pending mandatory drug testing legislation could result in anywhere from $4-$6 million of additional yearly revenue for Psychemedics.
- Even without this revenue, the shares appear modestly undervalued. With this revenue, my fair value estimate for the stock is $19, considerably above recent prices.