Cover your right eye and look at this earnings release from LCA-Vision (NASDAQ:LCAV) over here. Can you read the bottom line for me, please? What's that? It looks a little blurry? Well, let's see whether we can improve the focus a bit.
Wall Street Wisdom:
- General consensus. Only five analysts follow LCA. The buy ratings outnumber sells by 4-to-1.
- Revenues. Analysts believe that in the fourth quarter of 2005, LCA booked more than $46.6 million in revenue, for a 43% increase over the year-ago quarter.
- Earnings. Back in October, the company raised its earnings guidance for the full year by $0.15 to a range of from $1.40 to $1.45. Factoring that into consideration, analysts now believe the fourth quarter's per-share earnings increased 30% to $0.30.
Margin watch:
LCA's rolling margins have been on a steady upward march over the past 18 months.
|
Margins % |
6/04 |
9/04 |
12/04 |
3/05 |
6/05 |
9/05 |
|---|---|---|---|---|---|---|
|
Gross |
46.3 |
47.9 |
48.8 |
50.6 |
52.0 |
53.2 |
|
Op. |
16.3 |
18.4 |
19.3 |
22.7 |
24.4 |
25.9 |
|
Net |
26.1 |
25.5 |
25.2 |
19.6 |
15.7 |
16.8 |
Foolish forensics:
Although the net-margin line has been falling as gross and operating margins rise, that appears to be due to a couple of tax credits the company received in quarters 1 and 2 of 2004. Those credits inflated the net margins in the past. Their absence, combined with tax payments in more recent quarters, is what creates the appearance of declining net margins.
Valuation metrics:
Assuming that LCA hits the top mark for analysts' estimates, it will net $31.3 million this year. At the current price, the stock therefore trades for 36 times earnings. Although free cash flow outstrips GAAP earnings for this company, the price-to-free cash flow ratio still comes out at a pretty high 32. Now, considering that LCA has grown profits at a compound annual rate of 46% over the past five years, those might be reasonable valuations -- but only if LCA can keep the growth up. The 30% growth that analysts expect to see tomorrow, although great objectively, still makes this stock look expensive relative to its recent growth.
Competitors:
These include NovaMed (NASDAQ:NOVA) and TLC Vision (NASDAQ:TLCV).
Fool contributorRich Smithdoes not own shares of any company named above.
