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Cardiovascular Systems, A Company Changing Lives And A Stock With Room To Grow

|Includes: Cardiovascular Systems, Inc. (CSII)

Cardiovascular Disease is a killer that affects millions of people and touches families from all walks of life. Recently, on the Stock Watch segment of my nationally syndicated The George Jarkesy Show, I talked with Chartered Financial Analyst and the Chief Analyst of National Eagles and Angels about Cardiovascular Systems, Inc. (CSII : NASDAQ) and their work with a specific cardiovascular disease called PAD or Peripheral Arterial Disease. Below is the transcript in which I had an in depth discussion about CSII and the company's prospects going forward.

George Jarkesy: Clay, What is your stock pick of the day?

Clay Mahaffey: Well, George, this is the tech stock. It's Tech Tuesday, and I have a tech stock. Cardiovascular Systems, Inc. (CSII) is a medical device manufacturer. It's a fairly new company. They've only been in business about four years, but I like this company because it has a good growth story and value ratio there. It's not real expensive; the problem they solve is pulmonary arterial disease, or PAD. These are blockages in the arteries of your legs. Mostly found in people who are over 65. It can lead to severe pain, and amputation of the leg.

There are 12 million people suffering from this disease, and their solution in layman terms is like a plumber's roto rooter tool. It's a hand held device. They insert the wire into the artery. There's a crown on the middle of the wire that rotates. This crown is diamond encrusted, it's very hard. It twirls around real, real fast, and breaks up the clots, that are in the vessel, and they are just flushed away in the blood stream.

And it's amazing. The procedure only takes a few minutes, with a local anesthetic, so they are just sanding away the deposits from the inside of the blood vessels. And these devices sell for several thousand dollars. They have 77 percent gross margin. The business is up to about $90 million in the last 12 months of sales, and they have a number of good growth opportunities. One of the new products received the new technology of the year award from an Industry Trade Group, and they're working with the FDA to introduce a new product for coronary blockages with the similar technology, and they would be the only vendor licensed in the coronary application. That annually is a $700 million market. This company only has $90 million in sales, so there's a lot of upside if they can get this new product approved.

George Jarkesy: How big is the total market Clay? I mean $90 million of sales seems like it's big for such a young company.

Clay Mahaffey: Vascular products are around $2 billion; a cardiologist has a number of options to treat their patients. Surprisingly, the No. 1 option is amputation, very severe step, than you have stents and bypass, and putting in a balloon, and this idea of a plaque removal inside the vessel is an emerging technology. They have three competitors that have a similar type of product, but I can say they have only 15 percent of this market with the plaque removal-like Cardiovascular System's.

George Jarkesy: So they have a lot of room to grow?

Clay Mahaffey: There's a lot of room to grow. It's a cheaper, easier procedure. It can be done in a doctor's office. You don't have to go into the hospital, increased medical costs, reducing medical expenses of that type are working in their favor, and those add to the growth potential. The other reason I like it this company George is they had put out announcement that their sales were slowing down, the stock sold off 50 percent last year, and it's come back a little bit. It's well below the high of the year. Last year was $16.00.

George Jarkesy: So you like the company growth potential and the industry?

Clay Mahaffey: Yes.

George Jarkesy: The stock is beaten up, and it's got a lot of upside here.

Clay Mahaffey: It's up slightly now, however I think it could approach $16.00 towards the end of the year.

George Jarkesy: That's what I like buying growth at distressed prices. I have to tell Clay, you do something so valuable that our listeners need to understand and replicate. If you're an investor, and you buy a stock, and you can't explain it like Clay Mahaffey just did on the stock you bought, you shouldn't own it. If you can't explain what you own, why you own it or what the upside is, in relatively quick elevator pitch, than don't own the stock. It's a great pitch, it's a great story, it's beaten up, and it has good upside potential. It's has a large market to grow in and a foothold of market share, but it could grow too much larger percentage of market share. That's a good pitch, and the fundamentals have to be in line, but it's got to start with you have understand what you're buying. Clay, thanks for being on the George Jarkesy Show and for your information on Cardiovascular Systems.

Clay Mahaffey: Okay, Thanks George.

Disclaimer: The George Jarkesy Show or the National Eagles and Angels Association are not investment advisors. Any content published by The George Jarkesy Show or the National Eagles and Angels Association does not constitute individual investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. All content on The George Jarkesy Show Website and The National Eagles and Angels Association is produced independently of any advertising relationships.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.