An eerie tune, a bad dude named Angel Eyes, whizzing bullets, the gun-slinging Clint Eastwood, and Sergio Leone's sun-baked cinematography all come together in a glamorous tale of buried loot, savage killing, and Civil War in the Wild West to create one of my all-time favorite movies, " The Good, The Bad, and The Ugly."
Just like in the movie, there are some aspects of a company that are good, some that are bad, and some that are just downright ugly. Rather than focusing on a few stills or a few numbers on a balance sheet, I shall take the approach of sitting back, having some popcorn, and watching a more complete picture unfold.
The stock whose characteristics I will tease out and judge is United-Guardian (AMEX:UG) -- a maker of cosmetics, pharmaceuticals, personal and health-care products, and specialty industrial products.
The Good
United Guardian has many existing products that are either unique in their field or have unique characteristics, like the prescription urological drug Renacidin, the microbicidal Clorpactin, Klensoft surfactants, and the silver bullet, Lubrajel, which is a line of non-drying water-based lubricating and moisturizing gels used in the cosmetic and medical fields. Many new products are also coming out of the holster, like a chlorine-based disinfectant and Confetti, an innovative additive for cosmetic and personal care products. In addition, I like the fact that United Guardian has been working with a consultant to proactively anticipate new product trends: Looking for the next Lubrajel is definitely a plus. Sort of like looking for the bags of money in the unmarked grave next to Arch Stanton .
Among other bright spots that investors should note is the fact that United Guardian has no debt. It also has an annual dividend yield of 2.5% and low institutional ownership of 5%, with insiders holding nearly 43%. In addition, I like the conservative management style of United Guardian, an example of which is that the CEO's salary is closer to mine than to Clint's.
The Bad
Lubrajel and Renacidin make up 92% of United Guardian's sales, which means if one of these horses starts to limp, the cowboys on the Street may not be so kind. And while both total revenues and net income for the first nine months of 2005 increased 8% over the same time frame in 2004, revenue growth and earnings were flat for 2003 to 2004.
The UG(ly)
The only ugly thing that comes to mind is the ticker symbol. Tuco just doesn't play much of a role at UG.
Foolish final words
With a competitive industry full of big guns like Procter & Gamble (NYSE:PG), Motley Fool Inside Value pick Colgate-Palmolive (NYSE:CL), and Johnson & Johnson (NYSE:JNJ), investing in United Guardian's smaller $43 million cap, unique products, conservative management style, and collaborations with larger companies could prove to be very good, indeed, for the long haul.
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Fool contributor M.D. Mitchell owns none of the above companies.
