10/31/2008

Digirad Corporation: DRAD

Thought Provoking Videos Worth Watching

http://www.digirad.com/


“Digirad designs and sells nuclear technology for mobile cardiovascular imaging to doctors' offices and hospitals across the United States. The company commercialized the first nuclear gamma camera and offers its products through both sale and leasing options through its digital imaging solutions subsidiary. The company's gamma cameras range from single- to triple-head configuration, with imaging procedures topping 100,000 in 2007.”

The story by numbers

Current Price = $.84 and the stock has moved from $.71 per share the other day after we introduced helped by the strong market over the past few days.

Shares outstanding are 18,930,000 * .84 Price Per Share = $15,901,200 – Cash = 23,251,000 or 1.228 per share + 12,671,000 for total liabilities or .67 per share. EV = .28 =.84 -1.228 +.67 = .28

Per Share Data

Price = .84
Cash = .54
Short Term Investments = .68
Net Receivables = .53
Long Term Investments = .12
Total Liabilities = .67


EV (Enterprise Value) = .84-.54 -.68+.67 = .28

Add back Net Receivables, Long Term Investments and the valuation looks more enticing .28 EV - .12 (long term investments) – AR .53 = a negative -.37

With this superficial look DRAD appears to be selling below break up value.

Annual revenues were 77.19 million and GP of 20.52 million which compares very favorable to 5.300 million total enterprise value. One major negative is the heavy reliance on capital expenditures. DRAD reported a -4.443 million negative free cash flow over the prior 12 months. This stock is risky due to negative free cash flow; economic head winds, commodity nature of their product, potential for product obsolesce and further margin compression.

I purchased a few shares on Friday as part of a highly diversified portfolio.

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