VIFL: A Look at Earnings and the Underlying Trend

VIFL has reported earnings for 2011.

Total 2011 net income was $909,500, giving VIFL a P/E of 21.3 at the current market cap of $19.4 mm.
If we back out the $2mm in cash, the market cap is $17.4mm, and the P/E is 19.1.

Free Cash Flow was $705mm, which basically dropped onto the balance sheet as cash. The company got nearly a million dollars worth of cobalt this year, so they are pretty well stocked for growth.

Revenue grew at 24% yoy, and pre-tax earnings grew 31% yoy. This gives the stock a .68 PEG Ratio, or a .63 Cash-Backed-Out PEG. This stock is still at a good valuation for such a fast growth name.

There are two huge new capital expenditures on the bill for 2012 Q1:
1. ANOTHER shipment of Cobalt, $800k for 300 k curies. This is a 23% increase in the cobalt supply. The company must be expecting similar growth in 2012.
2. Replacing a Programmable Logic Control system for $800k. Apparently this is part of the maintenance of the facilities…

That is at least $1.2 mm of capital expenditures already for 2012. The company could easily cover this cost with the cash on the books right now, but at the rate it’s generating cash, it ought to have enough by the end of the year to have excess free cash flow.

The company has 1,300,000 curies of Cobalt currently. Because the maximum capacity for VIFL’s facilities is 4,500,000, the company could more than triple in size without having to purchase a new facility, if the underlying trend continues without a hitch.

Let’s take a look at the key trend that is causing all this growth: Growth in medical device irradiation. VIFL has been “aggressively pursuing” these customers to grow their base. These companies sterilize at the facilities in Florida and ship elsewhere.
VIFL’s growth rate is tied to the health of the medical device industry – if the industry grows, then VIFL can keep growing along with it. 60% of medical device manufacturers are more optimistic about 2012 than 2011, so that is a good sign that the trend is intact.

The company is probably good to own at any price below a P/E of 30, but I will take some of my position off the table as the stock approaches its 52 week high of $7.93 / share.

Disclosure: I am long VIFL


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