Volatility, thy name is stillICU Medical (NASDAQ:ICUI).
I've been paying attention to this small-cap med-tech stock since the bad old days when I was a sell-side analyst, and I still haven't figured out exactly why this stock is so consistently volatile. Heck, it almost makes Intuitive Surgical (NASDAQ:ISRG) look sleepy (and before you click "send" on your email, I said "almost").
At least Wednesday's volatility was the kind that investors like. The stock spiked up yesterday as earnings exceeded analyst estimates and the business did a fair bit better than management had projected at the end of last quarter. Revenue rose 80%, and though year-over-year comparisons aren't especially useful because of the Hospira (NYSE:HSP) transaction, revenues and margins all improved pretty meaningfully on a sequential basis.
What's more, this is a cash-flow-positive company with about $6 a share in cash on the balance sheet. And while new products like the TEGO and Orbit 90 aren't going to be world-beaters like a new implantable cardioverter defibrillator, they'll still make a profitable contribution to the company. In fact, I'll be curious to see how the Orbit 90 infusion set does, since I've long been a follower of the diabetes-care market and the last thing that major insulin-pump maker Medtronic (NYSE:MDT) needs is more possible competition on the disposables side of the business.
And that's not the only way ICU can do better. The company is moving its manual-assembly operations from its Salt Lake City facility to one in Mexico, and that should help the constant drive to improve margins. Higher margins is the name of the game in this business -- particularly when your competitors are Becton Dickinson (NYSE:BDX) and Baxter (NYSE:BAX).
I don't really want to sound like a broken record here, but my problems are the same as they've been with this stock before -- it's not at a price to give me that margin of safety that I want for what has been a rather volatile stock. Part of my valuation process includes return on capital, and that isn't quite good enough yet for me to get excited about the stock. But I suppose I should take heart -- with the history here, I'm sure I'll get at least one more look at these shares.
For more Foolish medical missives:
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
