The two companies signed a definitive agreement under which Owens & Minor will acquire Medical Action Industries for $13.80 a share in cash. The deal represents a transaction value of about $208 million, including assumed debt.
"With attractive margins and a strong competitive position, we expect this transaction to create value for shareholders and establish a scalable platform for future growth," Owens & Minor CEO Craig R. Smith said in a press release.
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TheStreet Ratings team rates MEDICAL ACTION INDUSTRIES as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate MEDICAL ACTION INDUSTRIES (MDCI) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, weak operating cash flow and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Health Care Equipment & Supplies industry. The net income increased by 103.4% when compared to the same quarter one year prior, rising from -$55.50 million to $1.91 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 0.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- MEDICAL ACTION INDUSTRIES reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MEDICAL ACTION INDUSTRIES reported poor results of -$3.36 versus -$0.01 in the prior year. This year, the market expects an improvement in earnings ($0.26 versus -$3.36).
- Net operating cash flow has significantly decreased to $1.36 million or 73.47% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- MDCI has underperformed the S&P 500 Index, declining 7.20% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full analysis from the report here: MDCI Ratings Report
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.