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OptimizeRx: A Small Company With Big Potential

Mar. 01, 2020 8:48 AM ETOptimizeRx Corporation (OPRX)4 Comments


  • OptimizeRx is the most undervalued company in my digital transformation stock universe.
  • The stock price is trading near 52-week lows.
  • OptimizeRx's financial messaging product is maturing, but the company is diversifying into new areas.
  • The company has a 53% revenue CAGR between 2011 and 2018.
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OptimizeRx Corporation (NASDAQ:OPRX) is a tiny health care company that provides digital health messaging services with the goal of "closing the communication gap between pharma, payers, physicians, and patients."

Trading at near 52-week lows, OptimizeRx is the most undervalued company in my digital transformation stock universe.

OptimizeRx stock chart

(Source: Yahoo Finance/MS Paint)

OptimizeRx had total revenue of $24.6 million for 2019, a 16% increase over 2018. This is one of the smallest stocks that I follow and its small customer base makes for a risky investment. For example, in Q3, the company missed on revenue by 30%, primarily due to two events:

First, one of our clients decided to stop supporting one of the brands about 12 months prior to their loss of exclusivity coming up in 2020, which in our experience was earlier than usual. The loss of this brand represented about $2 million in annual revenue or less than 10% of our revenue for the year

Secondly, the merger of 2 of our larger clients, which is now complete, pushed out about $3 million in revenue from the second half of '19 into 2020.

While OptimizeRx is a risky investment, it may be a smart investment for the turbulent times that we find ourselves in. The company has no debt and is not burning cash. Its free cash flow margin is positive. OptimizeRx is in the process of diversifying its product offerings which should provide some future stability for revenue growth. For these reasons, I am giving this company a bullish rating.

Growth Strategy

OptimizeRx's management believes that the company's financial messaging products are mature and competition will start to influence product pricing. Financial messaging has been the primary revenue driver for the company.

For this reason, the company has made moves to expand into three new but related market

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This article was written by

Steve Auger profile picture

I have been trading stocks, commodities, and options for more than 25 years. I have honed my skills in quantitative analysis and various stock investment tools for 15 years at Portfolio123 and offer services as a consultant in stock portfolios. I also own the financial data service Equity Analytx which provides aggregated fundamentals for a wide range of industries.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (4)

One thing that I do want to point out about the "soft power" of OPRX - the intersection between drug manufactures, patients and providers. They are probably the only one company with such an extensive connections. It is up to the company to develop products to monetize this.
kthor profile picture
Who are its clients and potential clients allowing them to grow?
I have owned since 2012. The company made some progress but what attracted me initially (financial messaging) is now very clear facing heavy competition. To the credit of this management team, they saw this coming, raised money and purchased two companies in 2018/2019. Now OPRX has a new package of product to offer. The CEO believes the new products and there is also indication for some growth in business. We have not seen in their financial result yet.

We are still talking about a small market here with current products. The CEO said that he is comfortable with consensus projections with analysts, i.e. 30-40 Million, in the next 2 years, This is a far cry from several billions of TAM (Total Addressable Market) claimed by OPRX but good enough for a micro company. Again, OPRX claimed to have billions of TAM for financial messaging product, it turned out to be only ~20 million. So, investors put them into a penalty box and rightly so at the moment.

OPRX may come up with more new products either developing internally or purchasing other companies. As long as they are cash flow positive, they will have a chance to be successful.
CWatsonSD profile picture
I've owned this for a while and though I agree they have some nice potential upside they need to start showing better results instead of continually talking about potential. I'm not selling and will hope CEO comments this past week actually become results rather than cool slides in a presentation. Maybe they improve in Q1 and then provide nice guidance for balance of year.
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