Tuesday, April 13, 2021

PDRX: Selling for Less than Liquidation Value

PD-Rx Pharmaceuticals (Ticker PDRX) is a company that's been around for over 33 years. Ever since COVID hit, the stock has been demolished. Interestingly enough, the stock hasn't really recovered like most other stocks.

Here's a 5-year chart:




Note the price decline at the end of 2018. This was probably mostly due to investors selling after collecting a $2.20 dividend at around that time.

I'm posting about PDRX because it is insanely cheap based on the numbers. Here are some of the key financial numbers over the past five years (fiscal year ends in June):



2020 2019 2018 2017 2016
Revenue ($M) 21.02 20.87 24.97 25.99 21.47
Net Inc ($000) -384.1* -12.9 621.2 627 507.7






Shares (M) 1.71 1.71 1.71 1.72 1.72
EPS ($) -0.22* -0.01 0.36 0.36 0.3
BV ($M) 6.63* 7.01 10.8 11.34 11.22






Dividend ($) -- 2.2 0.66 0.3 --






*does not include PPP forgiveness






The current market cap is around $4.9 million (share price $2.85), so the company's selling for less than 0.25x sales and less than 0.75x book value. Actually, book value is understated here because of the $993K PPP loan liability, so you're actually getting it for even cheaper. Also, the majority of the assets are current assets, so the company's selling for less than NCAV.

As far as where to find these numbers, you have to go to the company's website, because they do not file with the SEC or OTCMarkets. This is really want you want in a stock, because it's stuff like this that can make things stupid cheap.

Let's talk about some of the pros and cons of this company:

Pros:

- Selling for less than NCAV (approximation of liquidation value)
- Low and stable share count
- No preferred shares
- Management is shareholder friendly
    - They announced lowering their own salaries to offset some of the company's losses
    - They tend to issue dividends when there's excess cash
- Company is overlooked, due to lack of reporting to SEC/OTCMarkets

Cons:

- Likely not a growth company (management issued dividends in the recent past due to lack of investment opportunities)
- Company is currently unprofitable (in part due to COVID)

So, what's my investment thesis here? Basically, it's that the company returns to profitability as recovery from COVID happens and management cuts costs. If they're able to return to profit levels of something like the past, I think the stock could double from here.

Disclosure: Long PDRX

5 comments:

  1. What's the logic for why COVID crushed this company's performance so badly?

    Is it that they are generally providing drugs for short term use by patients for which they may have put off appointments during the pandemic?

    I don't see why COVID would cause a drop of prescriptions filled in general.

    ReplyDelete
  2. The CEO says that virtual doctor visits replacing in-office visits hurt sales, which would seem to suggest that prescriptions resulting from virtual visits are not really something they cover.

    ReplyDelete
  3. Virtual visits arent going away. Doctors love working from home.

    The doctors boss(CEO)enjoys working from home even more.

    ReplyDelete
  4. Price is back at $2.85. Has anything changed as you see it?

    ReplyDelete