Digirad: A Low Priced Stock With Lots Of Upside

| About: Digirad Corporation (DRAD)
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Summary

Digirad quarterly revenues rose by 11.8%.

The company is debt free.

Shareholders receive a dividend yield of 5.3%.

Insiders have been buying shares with no insider sales.

Based in Suwanee, Georgia, Digirad (NASDAQ:DRAD) is in the fast growing medical field, providing digital imaging solutions and medical diagnostic imaging systems. The stock is well positioned to move higher, and not just because it is in a strong industry.

The company has rising revenues, increased guidance, no debt and plenty of cash. Plus, the stock has had eight insider purchases during the last six months with no sales. This is shaping up to be a great buy opportunity.

Rising Revenues & EBITDA

Rising revenues can drive higher stock prices. Digirad recently reported a solid quarterly revenue increase of 11.8% with revenues of $13.9 million versus $12.4 million for the same quarter last year. Adjusted EBITDA rose by 13.3%. Growth of revenues and EBITDA are factors that generally precede share price increases.

Digirad
Third Quarter

2013

2014

Year over Year % Increase

Revenues $M

$12.4

$13.9

11.8%

Adj. EBITDA $M

$1.5

$1.7

13.3%

Digirad's growth is occurring in both segments. Diagnostic Services is the leading segment with a 14% in revenues and Diagnostics Imaging went up by 4.7%.

According to Matt Molchan, President and Chief Executive Officer. "Our revenues once again increased this quarter, and also for the first nine months of 2014. Excluding the recent impact of our recent Telerhythmics acquisition, our year over year revenues increased 3 percent during the third quarter, showing we are growing both organically as well as from our acquisitions."

Dividends

Dividends on low priced stocks are not very common. However, Digirad does pay a dividend of 5 cents per share, which it has been paying regularly for the last five quarters. The dividend is a great way for investors to receive their return on capital quickly. The current yield on the stock is 5.3%.

Guidance

Digirad stated that revenues should be at the high end of its financial guidance range it had previously announced. This is a good sign for shareholders. It also announced that non-GAAP adjusted diluted earnings and non-GAAP adjusted EBITDA should also be at the high end.

Debt Free with Plenty of Cash

One of the best features about this stock, and a great catalyst for a higher stock price is that the company has no debt, and has a decent cash position. As a matter of fact, even though the stock sells for less than $4 per share, it has $1.17 per share in cash.

The company's cash position for the latest quarter was $21.8 million, a 1.9% increase over the previous quarter at $21.4 million.

Insider Buying

To top it off, a great trigger for a boost in the share price is in place with insider buying. Insiders sell shares for many reasons, but they buy for only one reason, because they believe the stock price is going higher. In the case of Digirad, there have been eight insider buying transactions during the last six months, and no insider sales. This is a great indicator that the stock is a buy.

Conclusion

Let's review the several catalysts to cause this stock to rise in price:

· increasing revenues and EBITDA

· positive financial guidance

· a solid yield of over 5%

· no debt and lots of cash

· lots of insider buying

This combination of upside drivers should cause the stock price to increase substantially.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.