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A $90m micro-cap, capital-light compounder $PDEX
Pro-Dex manufactures autoclavable, battery-powered, and electric multi-function surgical drivers and shavers used primarily in the orthopedic, thoracic, and maxocranial facial markets.
A $90m micro-cap, capital-light compounder $PDEX
Pro-Dex manufactures autoclavable, battery-powered, and electric multi-function surgical drivers and shavers used primarily in the orthopedic, thoracic, and maxocranial facial markets.
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Probably a difficult one to put in my 'circle of competence' but might be worth trying.
Larger customers contract $PDEX rather than building in-house. Pro-Dex saves them the hassle of getting FDA approval and the risk of wasting time and capital.
Probably a difficult one to put in my 'circle of competence' but might be worth trying.
Larger customers contract $PDEX rather than building in-house. Pro-Dex saves them the hassle of getting FDA approval and the risk of wasting time and capital.
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Customer concentration is probably the biggest risk and the chance of any major customer developing in-house is definitely a threat.
$PDEX have recently doubled their R&D and lowering margins from 20% down to 11%. Recently increased manufacturing ability with a new building
Customer concentration is probably the biggest risk and the chance of any major customer developing in-house is definitely a threat.
$PDEX have recently doubled their R&D and lowering margins from 20% down to 11%. Recently increased manufacturing ability with a new building
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In the short-term this has hurt the bottom line. But could play a key role in improving products and creating new products to grow volumes with current customers and potentially even expand into new markets. Expansion into Europe could be a catalyst.
In the short-term this has hurt the bottom line. But could play a key role in improving products and creating new products to grow volumes with current customers and potentially even expand into new markets. Expansion into Europe could be a catalyst.
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$PDEX has grown revenues at a 15% CAGR over the past 5 years, whilst EBIT CAGR over the same period was a much more impressive ~30%. The average 5Y ROE is ~20%.
Over the past 18months they have spent a large amount of capex $9m, but ~$8m could be classed as 'growth' capex.
$PDEX has grown revenues at a 15% CAGR over the past 5 years, whilst EBIT CAGR over the same period was a much more impressive ~30%. The average 5Y ROE is ~20%.
Over the past 18months they have spent a large amount of capex $9m, but ~$8m could be classed as 'growth' capex.
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Typical capex is less than $1m. For reference, they generated $38m in revenue in FY21.
If we normalise earnings with a ~20% margin, $PDEX is currently trading at 12x earnings. Albeit, adjustments need to made to make the valuation seem appealing.
Typical capex is less than $1m. For reference, they generated $38m in revenue in FY21.
If we normalise earnings with a ~20% margin, $PDEX is currently trading at 12x earnings. Albeit, adjustments need to made to make the valuation seem appealing.
6/
Applying lower, more conservative margins prices them at around ~15-18x earnings. Which is probably a fair valuation.
It is a high ROIC, capital-light business model likely to grow EPS in the high-teens whilst expanding their manufacturing capacity.
Applying lower, more conservative margins prices them at around ~15-18x earnings. Which is probably a fair valuation.
It is a high ROIC, capital-light business model likely to grow EPS in the high-teens whilst expanding their manufacturing capacity.
7/
But the customer concentration may justify the valuation. Being an illiquid micro-cap, the market may offer a better price in the future
Either way it's an interesting name to follow. I'm only at the surface and reasonable chance of passing due to being outside my circle.
But the customer concentration may justify the valuation. Being an illiquid micro-cap, the market may offer a better price in the future
Either way it's an interesting name to follow. I'm only at the surface and reasonable chance of passing due to being outside my circle.
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