Can Star Scientific Keep Smokin' in the Second Half?

With half of 2012 in the record books, it's important to take a look at whether the stocks that interest you can live up to their full potential. By making sure you know about a company's future plans and possible challenges, you can make a better decision about whether it's a smart investment for your portfolio.

Today, let's take a look at Star Scientific (Nasdaq: CIGX  ) . As we saw in our look at Star Scientific last month, the tiny company has largely moved on from its initial attempt to sell alternative tobacco products. But with its dietary supplements starting to gain traction, investors have seen a glimmer of hope in the long-punished shares, which is why the stock has more than doubled so far this year. Let's take a quick look at Star Scientific's prospects for the rest of the year and beyond.

Stats on Star Scientific

2012 EPS Estimate ($0.10)
2013 EPS Estimate ($0.08)
2012 Sales Growth Estimate 298%
2013 Sales Growth Estimate 52%
CAPS Rating (out of 5) *

Source: S&P Capital IQ.

What will the rest of 2012 bring for Star Scientific?
Traditionally, most investors have lumped Star Scientific into the same category as big tobacco stocks, owing to Star's attempts to create less carcinogenic tobacco. As a result, given the success that Altria (NYSE: MO  ) , Reynolds American (NYSE: RAI  ) , and Philip Morris International (NYSE: PM  ) have had in their shares recently, one might think Star Scientific's rise might be related to that general trend.

But Star Scientific's future prospects all hinge on its dietary supplement business. Revenue for Star's dissolvable tobacco products remains insignificant, but supplement sales have skyrocketed and will contribute nearly all of its growth going forward. With its distribution deal with GNC Holdings (NYSE: GNC  ) , Star Scientific has a real opportunity finally to get on the map in terms of revenue.

In particular, most of the news recently has centered on the company's Anatabloc dietary supplement. Late last month, Star Scientific got a patent for producing anatabine, which is the supplement's active ingredient. At a presentation before a meeting of endocrine medical specialists, the company announced a study that suggests possible thyroid benefits from Anatabloc as well.

Looking forward, Star Scientific's ramp-up in sales could well lead more investors into the stock, even though profitability still seems a long way off. The key to look for is how well Star Scientific does in keeping costs down and preserving its cash rather than having to do dilutive stock offerings to raise capital.

Star Scientific has some upside potential, but if it's riskier than you have the stomach for, there are some other ideas you might like better. Let me invite you to learn about three smart long-term stock plays in the Fool's latest special report. It's yours for the taking and is absolutely free, but don't miss out -- click here and read it today.

Click here to add Star Scientific to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.


Read/Post Comments (2) | Recommend This Article (3)

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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.

  • Report this Comment On July 06, 2012, at 2:42 PM, afreshapproach wrote:

    Can CIGX keep smoking in Q3 and Q4? To borrow that figure of speech, in a word, YES.

    It may be that CIGX hasn't shaken off its persona of being a player in the tobacco industry - in the trader community. But in the

    medical community, in the community of GNC

    staff members, and traders who subscribe to well-informed stock trading advisory newsletters, CIGX's newest product - anatabloc - is already well known to be a ground-breaking supplement that will change the way that some terrible diseases will be treated firstly in America, then Canada, and then the rest of the world. For now, the product label states that it is an anti-inflammatory support product. Later this year,

    groundbreaking study results will show what

    the anit-inflammtory properties of this product

    can remedy in the treatment of diseases in which inflammation is a major factor. When these are published, CIGX may well be the

    "last stock you'll ever need".

  • Report this Comment On July 07, 2012, at 9:16 PM, GundersonGroup wrote:

    Yes, this will be the last stock some folks ever need. After they lose their savings in this pump and dump company and jump off the Golden Gate bridge.

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