Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



STARLIMS' Dim Reception

To get investors interested in an IPO, Wall Street firms normally try to price the offering at a cheap valuation. For yesterday's IPO of STARLIMS (Nasdaq: LIMS  ) , the theory didn't work and the stock price was up a mere $0.03 to $13.53. It's true the Nasdaq had a bad day, but the company also seems to have limited growth potential and fierce competition.

STARLIMS develops software to manage processing, storage, and analysis for laboratories. More than 500 labs use the software; customers include Amgen (Nasdaq: AMGN  ) , Chevron (NYSE: CVX  ) , Exxon Mobil (NYSE: XOM  ) , the U.S. Centers for Disease Control and Prevention, and the U.S. Department of Defense Cyber Crime Center.

Like the fast-growing, STARLIMS was smart to make its software Web-based. This is important because its customers are global and need to centralize data. It improves the accuracy of the analysis as well as regulatory compliance.

Another good move was teaming up with EMC (NYSE: EMC  ) to embed Documentum software. Not only does STARLIMS avoid spending huge amounts to create technology, it also gets a competitive edge when dealing with complex data types. The company plans to release a major software upgrade in the fourth quarter of this year. 

During the past year, STARLIMS posted a 21% increase in revenues to $19.7 million and net income was $3.7 million. This is fine, but the growth opportunity seems to be limited.  A report from Frost & Sullivan estimates the market size at $440 million and the annual growth rate at 12%. There are also major competitors like Thermo Fisher Scientific (Nasdaq: TMO  ) and Applera Corp-Applied Biosystems Group (NYSE: ABI  ) . 

With an enterprise value of $88 million, STARLIMS is selling at a hefty 4.4 times revenues. That's a steep price to pay for a small company growing at a decent rate.

Related articles:

Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He currently is ranked 2,700 out of 29,300 rated players in CAPS. The Fool's disclosure policy never dims.

Read/Post Comments (0) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 528555, ~/Articles/ArticleHandler.aspx, 10/20/2016 5:35:57 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,162.35 -40.27 -0.22%
S&P 500 2,141.34 -2.95 -0.14%
NASD 5,241.83 -4.58 -0.09%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
ABI $0.00 Down +0.00 +0.00%
Applied Biosystem,… CAPS Rating: **
AMGN $161.50 Up +0.42 +0.26%
Amgen CAPS Rating: ****
CVX $101.87 Down -0.40 -0.39%
Chevron CAPS Rating: ****
EMC $0.00 Down +0.00 +0.00%
EMC CAPS Rating: ****
XOM $87.21 Up +0.04 +0.05%
ExxonMobil CAPS Rating: ****