GEO Investing

Medical Device Company EDAP TMS Treats Prostate Cancer.  Revenue & Profits Has Us Taking a Closer Look.

By Maj Soueidan, President GeoInvesting

Good Morning. I hope your day is going well. The past 8 trading days have certainly been volatile. In fact, the Nasdaq has not seen this many alternating up/down days since 2007.

EDAP Market Performance Seesaw

In the midst of volatility we love to perform research to find stocks that have not reacted to bullish news.  Our last “Buy the Dip” portfolio constructed in early January 2016 when the market was in a tailspin performed well and returned 36% at its peak.

Start Peak Peak Return
EDUC $9.22 $15.03 63%
MEET $3.31 $3.81 15%
TAYD $15.34 $17.01 11%
SMCI $24.43 $34.69 42%
NVEE $19.59 $29.30 50%
Ave Peak Return 36%

As this mock portfolio has already played out, we are now turning our attention to finding stocks to construct a follow-up mock portfolio.

Just last week, over 180 microcap stocks had reported earnings for the latest financial period. We make it a point to summarize every earnings press release for microcaps valued at less than $350 million market cap. We then like to highlight the best earnings reports in our morning email alerts to GeoInvesting premium members. I estimate that we can reduce your earnings press release research process from about 6 hours per day session to less than 20 minutes.

EDAP Among Recent Strong Earnings Reports for Microcaps

Note that I prefer to read press releases instead of using automated stock screeners to perform my research since the data used to power stock screeners (especially earnings per share) can often be inaccurate or delayed causing you to miss great stocks or buy stocks that appear cheaper than they really are.  We are taking a look at a few of the following stocks that reported strong earnings growth and/or beat analyst estimates last week.

Wednesday May 18, 2016 Premium Morning Email

Company Price** EPS Estimate Reported EPS Prior Year Reported EPS Rev Estimate Reported Rev Prior Year Rev
Continental Materials (AMEX:CUO) $15.05 n/a $0.18* -$0.21* n/a $34.23 $30.69
Tofutti Brands (AMEX:TOF) $2.85 n/a $0.03* -$0.07* n/a $3.74 $3.14
EDAP TMS S.A.  (NASDAQ:EDAP)  $3.29 -$0.02 $0.06* -$0.11* $6.80 $9.63 $6.89

*denotes non-GAAP; **Pre-market; Revenues in Millions, unless otherwise specified

Thursday May 19 Premium Morning Email

Company Price** EPS Estimate Reported EPS Prior Year Reported EPS Rev Estimate Reported Rev Prior Year Rev
Syneron Medical  (NMS:ELOS) $7.00 $0.01 $0.04* $0.02* $64.38 $68.70 $63.40
Enzymotec (NMS:ENZY) $7.89 $0.05 $0.09* $0.09* $13.85 $13.97 $11.30
Perry Ellis Int (NMS:PERY) $16.45 $0.90 $1.01* $0.99* $253.60 $261.29 $266.41

*denotes non-GAAP; **Pre-market; Revenues in Millions, unless otherwise specified

We are particularly interested in learning more about EDAP, headquartered in France and listed on the NASDAQ. The company markets a minimally invasive treatment for prostate tissue removal in the U.S. and for localized prostate cancer in the rest of the world. The company’s treatment is generally recommended for patients with localized prostate cancers (stages T1-T2) who are not candidates for surgery and instead prefer an alternative option, or for patients who failed radiotherapy treatment.  Management commentary from its first quarter 2016 press release appears to imply that the company may have reached an inflection point in its growth cycle:

“Overall, we believe that EDAP is positioned for further near-term growth and significant longer-term success. We have a strong, global pipeline of HIFU projects in our core urology market and continue to advance our R&D efforts aimed at expanding the application of our world-class technology into other indications. With the proceeds of our recently completed registered direct offering, we are well funded to support the Company`s future growth, extend our leadership position in the markets we serve, enter new markets and create value for physicians, patients and our shareholders.”

We plan to interview management to determine if the trends set in Q1 2016 are sustainable since the company has experienced volatile revenue patterns in the past. The stock is selling at around $3.50 and with about 30 million shares outstanding is fairly liquid for a microcap. We are currently not long the stock.

To continue to receive real time research and trading updates on this company and others we are tracking, please consider subscribing to our premium service here where you can learn more about we do.

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