Lantheus Holdings (LNTH – Snapshot Report) isn’t exactly a household name. In fact, I am betting that this stock is flying well under the radar for most investors. There are a few things that stick out to me for this play as a good long term investment and there are a few that are more short term in nature. Either way you cut it LNTH is looking good to me.
First let me list the positives I see with this stock and then we can go over the normal attributes that have made this Zacks Rank #1 (Strong Buy) stock the Bull of the Day.
Why I Like It
This is a small cap stock in a “risk on” environment.
Small cap stocks have been out-performing of late.
Revenue trends are pointing to continued sequential growth.
5 straight beats of the Zacks Consensus Estimate.
Room for multiple expansion (trades at 14x forward earnings as compared to 22x industry average).
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The Recent Numbers
LNTH beat the Zacks Consensus Estimate of $0.06 when it reported $0.24 in the first week of August. This $0.18 beat was good for a 300% positive earnings surprise.
The topline was also impressive with the company delivering $78M in sales when the Zacks Consensus Estimate was looking for $73M. That $5M beat was good for a 7.25% positive revenue surprise.
I mentioned the idea of sequential revenue growth as one of the reasons I like this stock. Last year the company recorded revenues of $75M in the March quarter and then posted $73M in the June quarter. That isn’t what gets me excited and isn’t growth, it is contraction. This year the March quarter saw $76M while the June quarter was $78M. So where there was contraction last year, this year we have expansion.
LNTH is in the medical products industry and they sell products in the diagnostic imaging space. Roughly half the sales come from DEFINITY which helps doctors when looking at echocardiograms. The basic idea is the aging population is going to the doctor’s office a lot more and this helps identify problems, or rather, show that there aren’t health problems (hopefully).
As you can see from the image above, DEFINITY helps physicians interpret echo-cardiograms.
I have already mentioned the fact that LNTH has beaten the Zacks Consensus Estimate in each of the five reports that I see. What I didn’t mention what that they are HUGE beats. The first beat was 135% ahead of expectations and it was followed up by a 350% beat.
The December 2015 quarter saw the company post EPS of $0.13 when the Zacks Consensus Estimate was calling for a break-even quarter. That sort of beat tends to get investor’s attention and as a result they bid the stock higher by more than 17% in the session following the earnings release.
The topline also has a very strong history, but there isn’t a lot of data yet. That said, let’s take a look at this chart that shows just the quarterly revenues.
There was a recent big move higher in estimates. The Zacks Consensus Estimate was holding at $0.32 over the last three months, but in August the number has shot up to $0.54.
The 2017 number also saw a big move higher, with the estimate going from $0.61 to $0.73. This tells me things are moving in the right direction.
Here is a chart of the trailing twelve months EPS:
I mentioned the forward PE as being very attractive, but I need to also mention the price to sales multiple. It comes in at 0.8x while the industry average is a healthy 3.1x. This implies the stock is trading at a big discount.
I see the analyst are looking at earnings contraction this year, but next year we are looking at earnings growth of 36%. Couple that with revenue growth that is ahead of the industry average and you have something really great on your hands.
Zacks has developed a chart that helps investors see how earnings estimates have impacted the price of the stock over the last several years. We call this chart the price and consensus chart, and each color coded lines represents analyst estimates over a designated year. As estimates increase, the stock tends to follow. The Zacks Rank is impacted by earnings estimate increases, beats and incorporates the idea of analyst agreement and magnitude. As a Zacks Rank #1 (Strong Buy) we see that estimates are moving higher.
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Follow Brian Bolan on twitter at @BBolan1