Analysis on Demand

[poli]

David: 

When you get a chance could you take a look at SIMG and see what you think?  I bought some in the mid 5's.

Thanks, Poli

[Jim897]

David, here's another stock that I'd like you to analyze, UTVG.  It is a great growth story.  It is a leading air travel and air cargo transportation agency in Southern China.  The company (or analysts - I'm not sure which) is estimating .24 eps for 2007 and analysts are estimating .39 for 2008.  It currently trades at 3.45 and has been very bullish lately.

[realcoolhead]

SIGM, this stock seems holding up very well during the latest pullback.

David, care to comment on this? I got SIGM from this guy, and his talking fits your thesis pretty well ...

http://www.changewave.com/freecontent/2007/09/freetobymain20070919.html

[n1notesguy]

Hi David,

If you have time could you look into CHCG. Thank you.

Ken

[David Randolph]

HMSY please.

I chatted with Ramsburg the other day, and the chart looks bullish.



Jacky

1. Profile

HMS Holdings Corp. (HMSY), through its subsidiary, Health Management Systems, Inc. (HMS), provides cost containment, coordination of benefits, and program integrity services to government healthcare programs in the United States. Coordination of benefits services route claims already paid by a government program to the liable third party, which then reimburses the government payor. Cost avoidance services provide validated insurance coverage information that is used by government payors to reject claims that are the responsibility of a third party, typically a group health plan sponsored by a beneficiary's employer. Program integrity services review claims paid by government programs, identify payments errors, and then recoup the erroneous payments. The company also provides Medicare bad debt cost reporting and Disproportionate Share claiming services to healthcare providers. These services enable customers to increase revenues, reduce costs, and ensure regulatory compliance. The company's customers include State Medicaid agencies, government-sponsored managed care plans, child support agencies, SCHIP programs, the Veterans Health Administration, and other public programs. It helps these programs contain healthcare costs by identifying third party insurance coverage and recovering expenditures that were the responsibility of the third party, or that were paid in error. HMS Holdings was founded in 1974 and is headquartered in New York, New York.

2. Stock Price History



HMSY had its debut in the stock market in December 18, 1992, at $7.77 per share. Today it closed at $24.85 and this represents an average annual return of 8%. I identify four phases in the stock's history:

1) 1993 - 96

Revenue and EPS were growing nicely until mid 96, when net profit margin declined sharply.

2) 1996 - 2000

HMSY declined 97.8% between the mid 1996 high of $37 and the December 2000 low of $0.81. How's that for a "safe" investment in a company with close ties with the US government?

Fundamentally what happened was that a $0.39 profit per share in 96 turned into a loss per share of ($1.09) in 2001.

3) 2001

This was the bottoming phase. It is curious to note that the bottom in the share price coincided with the company's most horrible losses. Should we buy shares when companies are losing money? Well, yes, if there's some perspective of a turnaround.

4) 2002 - Now

There certainly has been a fundamental turnaround at HMSY, with EPS going from $0.05 in 2002 to $0.22 in 2006. Analysts expect $0.55 EPS in 07 and $0.73 in 08.

This means the 2007 earnings multiple is $24.85/$0.55 = 45, which is quite high.

3. Short Term Chart



The short term technical trend is certainly bullish. I wonder what happened in the volume spikes on points 1 and 2.

I don't see any news out on point 1, I guess volume spiked because the price was coming down and this attracted buyers. On point 2, when the stock rose nearly 20% in one day, the news out was the following:

• HMS Holdings Corp. Announces Second Quarter 2007 Results; Raises Guidance For Full Year 2007
PR Newswire (Thu, Aug 2)

I see there was a 103% revenue growth in Q2 2007 when compared to Q2 2006, but that was at least partially due to an acquisition.

There's no doubt fundamentals are improving but that seems completely priced in, in my opinion, since the stock is trading at 45 times future earnings.

Since the company had wild fluctuations in its revenues and earnings in the past, I think its business isn't as predictable as one could think. Therefore I believe the stock is expensive at this point.

4. Conclusion

HMSY looks fully valued or even overvalued to me, even though the technical trend is bullish. I'm neutral on the stock and not interested in investing in it.

Thanks anyway jackyw, good luck if you own it

Next I'll cover INSW on sctrben's request.

[Rmagos]

Hi David would you please take a look to EEE Evergreen Energy...Looks bullish to me but I don`t know the fundamentals
Thank You

[JKN]

Has anyone suggested SLP?  La -onda (Oliver) and kslifka have been following this one. It has been up big. It has pulled back on low volume to support and might offer a good buying opp.  It showed up on one my filters a few weeks back, along with GSB.

Kent

[guitarman]

Hi David
I was wondering about NTRZ?
It's come down quite a bit and I keep seeing good news.
Thanks and Best
GMan

[ygtrdr]

Morning David, or in your case, good afternoon!

FSTR please.

thanks.

David, along with this could you also do LOCM when you get the time?

thanks

[David Randolph]

It's been a while since INSM was hit on before... INSMED has come a long way since those last discussions, all speculation of how the court case would go is now behind them. Test Phases are soon to be bringing new speculative excitement on several fronts, ROP, HARS, MMD, ALS, FOB... 

9 NEW positions, 15 INCREASED positions, and only 3 sold out is a complete turnaround in institutional sentiment...
http://www.nasdaq.com/asp/Holdings.asp?F...

1. Profile

Insmed Incorporated (INSM), a biopharmaceutical company, engages in the development and commercialization of drugs to treat metabolic diseases, endocrine disorders, and oncology. Its lead product candidate IPLEX, a recombinant protein product candidate, is in Phase II clinical trials for the treatment of myotonic muscular dystrophy, the common form of adult-onset muscular dystrophy. It is also conducting a Phase II clinical study for investigating IPLEX as a treatment for HIV associated adipose redistribution syndrome; a Phase I clinical study investigating IPLEX as a treatment for retinopathy of prematurity, a disease where the small blood vessels in the back of the eye and the retina grow abnormally; and an expanded access program in Italy to provide IPLEX to physicians for patients with amyotrophic lateral sclerosis, a neurodegenerative disease that affects nerve cells in the brain and the spinal cord. In addition, Insmed is developing INSM-18, a small molecule tyrosine kinase inhibitor that is under Phase I/II clinical trials for the treatment of breast, lung, pancreatic, and prostate tumors; and rhIGFBP-3, a Phase I clinical product candidate for the treatment of breast, prostate, liver, ovarian, and colon cancers. The company has license and collaborative agreements with Fujisawa Pharmaceutical Co., Ltd. to use IGF-I therapy for the treatment of extreme or severe insulin resistant diabetes; and a license to Pharmacia AB's portfolio of regulatory filings pertaining to rhIGF. Insmed was founded in 1999 and is headquartered in Richmond, Virginia.

2. Stock Price History



Before I begin let me start by saying that I dislike biotechnology stocks in general, and the reason for that is simple, I dislike them because most of them keep diluting shareholder's value. This happens because most biotechnolohy companies don't sell anything and have huge losses, so to survive they need a continuous flow of capital. They get this capital by issuing and selling new shares to investors. Every time a new share is printed existing shareholders see the value of their shares being diminished as they represent less of the company.

On this issue INSM looks like the champion of dilution, with the share count rising 122 fold since 1999. The company printed 21 million new shares just in the first half of 2007.

A second issue, as I look to INSM's profile, I see it has changed. When I first met this company and was still an ignorant on fundamental analysis (I guess that one year from now I'll consider I was an ignorant now), the company was developing IPLEX to cure children whom had a rare disease which made them abnormally small. I see IPLEX is being studied for other uses now.

I don't know enough to know the potential market for these other uses of the drug, or how long they are from being marketed. I just know that whatever rise the stock may have, it will be used to sell some more shares. This has been the history of this company and I don't see any change in the near or medium term future.

This isn't to say it is impossible for INSM to double or triple if there's some of those "bombastic" news releases which characterize biotech stocks. But will it be sustainable? I doubt it.

Anyway, I see sctrben made his analysis on the stock and likes it, so I just wish I'm wrong or incomplete, good luck

[kpunarc]

What do you think about JRJC

It's been on fire for the past week...

[BigSully1]

Just wondering what everyone thinks, especially David, about the sky rocketing Chinese stocks and ADR's recently, many on NO news at all.   O.K., we all knowabout the solar stocks and others like JRJC, CPSL, EFUT etc., but then there's CEA, SSRX, XFMC, ATV, ZNH, SDTH to name just a few.

Is it irrational exuberance or is there more to it?

Todays rockets in order of gain (52 to 15%) include INTN, CRGI, CBAK, JADE, ORS, KUN, CDS, FSIN, YTEC, NWD, NINE, FFHL.

[David Randolph]

Just wondering what everyone thinks, especially David, about the sky rocketing Chinese stocks and ADR's recently, many on NO news at all.   O.K., we all knowabout the solar stocks and others like JRJC, CPSL, EFUT etc., but then there's CEA, SSRX, XFMC, ATV, ZNH, SDTH to name just a few.

Is it irrational exuberance or is there more to it?

Todays rockets in order of gain (52 to 15%) include INTN, CRGI, CBAK, JADE, ORS, KUN, CDS, FSIN, YTEC, NWD, NINE, FFHL.

I took a brief look at all the stocks you have in this list and I think each case is different, even though they're moving as a group in what seems to be the start of a speculative fever which worries me.

I guess all stocks in your list rose because they're "Chinese", but some have sound and attractive fundamentals and others don't. Of all the stocks in your list the one which attracted me the most was YTEC and I'm going to make a more in depth analysis on it and possibly buy it for the Main Portfolio today.

Thanks BigSully1

[David Randolph]

My fundamental data service had the data for YTEC wrong, the market cap is double of what I thought it was. I also see a 227% increase in the share count from the prior year and, because of that, a decline in EPS, even though net income rose.

This pretty much puts YTEC aside as a long term investment, even though it can fly some more today.

I'm overwhelmed by your list BigSully1 and I dislike to have to hurry or miss the train ... the fact that those stocks are moving so fast doesn't bode well for the future. I guess what's moving them is that the Chinese will be able to buy shares traded in foreign exchanges (I read legislation will change - and that explains the enormous rally in the Hang Seng). So it is a liquidity driven move, not value driven.

I'm going to have to study some more on the issue. I won't run after speculative stocks with "not so good" fundamentals, just because they're flying high. The risk is also high. Good luck to the ones who will join the "Chinese" fever.

[ygtrdr]

I wonder when the Chinese market will crash? Before or after the the '08 Olympics?