PSS Profits From Niches: Under the Radar
JACKSONVILLE, Fla. ( TheStreet) -- PSS World Medical (PSSI) supplies equipment and drugs to doctors' offices, long-term care facilities and home-care providers. The company's non-hospital focus has helped it generate consistent growth.
The Jacksonville, Fla.-based company's fiscal first-quarter net income rose 42% to $13 million and earnings per share climbed 53% to 23 cents, boosted by a lower share count. Revenue grew 5% to $494 million. Its gross margin rose from 29% to 30%, but its operating margin remained steady at 4%.
PSS's elder care unit is benefitting as the aging baby boomer generation boost demand for medical treatment. Its quarterly sales jumped 7% and its operating margin tacked on 85 basis points. The company's physician supply unit posted 3% sales growth and a 169 basis point improvement in operating margin.
The company has a stable financial position. PSS holds $130 million of cash, translating to an adequate quick ratio of 1.5. A debt-to-equity of 0.6 reflects conservative leverage. We give the company a financial strength score of 7.9 out of 10, higher than the "buy"-list average of 7.With a trailing price-to-earnings ratio of 21 and a forward price-to-earnings ratio of 18, the stock trades at a premium to the market and other medical suppliers. However, the premium is justified by a record of consistent growth. PSS has achieved a three-year average growth rate of 6% for revenue and 13% for profit. Shares of PSS have advanced 28% in the past year, outperforming the 6.1% increase of the S&P 600 Health Care Index. The stock has climbed 17% annually, on average, in the past five years, compared with a 6.4% gain for the benchmark. PSS has a beta, a measure of market correlation, of 0.8 and doesn't pay dividends.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV