Psychemedics Corp: Splitting Hairs For Profit

Psychemedics Corporation (NASDAQ:PMD) is the world's largest provider of hair testing for the detection of drugs of abuse. The Company's patented process is used by thousands of U.S. and international clients, including over 10% of the Fortune 500 companies, for pre-employment and random drug testing. Major police departments, Federal Reserve Banks, schools, and other public entities also rely on its unique patented drug testing process.

The company strongly believes their drug testing method to be superior to any other product currently in use, including traditional urine testing and other hair testing methods.

PMD Chart

PMD data by YCharts

PMD trades at a P/E of 19.81, its earnings have been growing a little below 10% on average over the past 10 years. However, over the past 3 years earnings have been growing at 25% per year.

In 2010 and 2011 and 2012 there have been capital expenditures of 1, 1 and 2 million. In the years 2003 - 2009 there were none. On a net income of 3 million this has been a significant drag in recent years.

The balance sheet is strong with $ 2.5 million in cash as of march 31, 2013 and no long term debt. Despite their recent heavy investments in new equipment and software.

Book value is around $2/share, about $0.50 of which is cash.

PMD pays a quarterly dividend (which they paid 67 times in a row). Total annual dividend stands around 5%.

Raymond C. Kubacki (CEO) states in their latest 2013 news release:

"Our investment in sales and marketing continues to pay off as our new business growth accounted for the entire gain in the quarter, as well as offsetting the decline in our base business due to the weak hiring/jobs environment."

"During the quarter, we also completed the majority of the transition to our new patented

This article was written by

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Special-Situation And Event-Driven Ideas To Improve Risk Adjusted Returns
15 years of investing and I feel like a rookie in his first year at the academy. My roots are in the value school but over time I've learned to respect different approaches. I'm interested in what quants do, options traders do, and even what WallStreetBets is doing (keep your friends close and...)

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Since 2020 I host a podcast/videocast where I discuss (special-situation/event-driven) market events and investment ideas with top analysts, portfolio managers, hedge fund managers, experts, and other investment professionals. I highly recommend it (pick episodes around topics that interest you) for the amazing guests that come on with regularity.

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