Tag - Cscx

Cardiac Science Corporation (Nasdaq:CSCX) was in poor health 18 months ago. Sales of the Bothell, Wash.-based company’s heart monitoring equipment were slowing, competition was tough and the stress undeniably affected its ticker: in one year, its stock dropped about 38%, to $7.25 in September 2006, an all-time low.

The patient is doing much better today, though, thanks to a turnaround in its heart monitoring equipment business and strong growth in sales of automated external defibrillators (AEDs), portable devices for shocking a heart back into rhythm after a heart attack. AEDs are cheaper (about $1,000) versions of the defibrillators seen in every medical show ever aired, which cost about $10,000 apiece. AEDs are popular devices these days, sold to airports, corporations and government agencies to jump start ailing hearts even before the ambulance arrives.

In the fourth quarter of 2007, sales rose 29% from a year earlier, to $50.4 million, pushed up by 45% growth in AED sales and 16% growth in monitoring equipment. That broke a losing streak in which monitoring revenue had declined year-to-year for six quarters straight. Net income was $2.37 million, compared to a $35,000 loss a year earlier.

Its stock price, however, has not fully reflected its recovery. It topped out at $11.50 in July, 2007, and closed at $8.16 on Tuesday. Its 52-week low was $7.35, reached last December.

For that reason, analysts see it as a good buying opportunity. “CSCX has recently experienced a sell-off which we believe is overdone,” wrote Sun Trust Robinson Humphrey analyst Jonathan Block on Jan. 8. The stock is now trading at just 0.9 times his estimated 2008 revenues of $202 million (its market cap is $186 million.) Block projects earnings of $0.37 per share in 2008, up from $0.24 per share last year. His target price is $14, a 1.5 times multiple of 2008 revenues, still below the 2 times forward revenues its peer group averages.

For the past ten years the stocks picked by BusinessWeek’s Gene G. Marcial have outperformed the S&P 500, the Dow Jones Industrial Average and the Russell 2000 after one day and after one, three and six months. Between 1997 through the end of last year, the stocks featured in Marcial’s “Inside Wall Street” column returned, on average, 7.1% in the immediate six-month time span, two percentage points better than the Russell 2000.

Small-cap stocks have been a big reason for Marcial’s success over the years. Among the companies Marcial has recommended this year are Pipex Pharmaceuticals, Inc. (AMEX: PP), Ultralife Batteries, Inc. (Nasdaq: ULBI), Exponent, Inc. (Nasdaq: EXPO), Cardiac Science Corp. (Nasdaq: CSCX), and USA Technologies, Inc. (Nasdaq: USAT).

In the following interview with SmallCapInvestor.com Marcial talks about his approach to stock picking and his outlook for small-cap stocks.

Explain your investment process and criteria for finding great stocks.

Since I am a financial journalist, the first question I ask about any investment idea is, "What is the story, and will it be of great interest to my readers?" I am not surprised that this approach results in me getting good stocks to write about, and often they are undiscovered and below the radar screen of the institutions. I believe that a good company with a great story -- about a product, technology, earnings growth, possibly a takeover play, or a restructuring, including spin-offs or asset sales -- could well be a great stock to buy.