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Small-cap biotech scores high with margins, earnings growth Add to ...

Validea’s pick of the week provides a detailed report on a company that scores well in the stock-screening service’s model portfolios. On Validea.ca, investors can analyze 1,000 Canadian stocks through 12 different guru-based models and get individual reports on each company. Globe Investor has a distribution agreement with Validea.ca. Try it.

Massachusetts-based Anika Therapeutics develops therapeutic products for tissue protection, healing and repair based on hyaluronic acid, a naturally occurring polymer found throughout the body that enhances joint function and coats, protects, cushions and lubricates soft tissues. Market cap is $650-million (U.S.)

Shares have bucked the downward biotech trend this year, thanks to better-than-expected first quarter earnings and the FDA's approval of Monovisc, its single-injection treatment for osteoarthritis knee pain. Its 12-month relative strength of 95 is one reason it gets strong interest from the Motley Fool-based strategy.

The Motley Fool strategy also likes its 35-per-cent after-tax profit margins, and big Q1 growth (362-per-cent EPS, 123-per-cent sales)

The company has grown earnings at a 47-per-cent pace over the long term (using an average of the 3-, 4- and 5-year EPS growth rates), which the Peter Lynch based model likes.

Anika has 0.45 P/E-to-growth ratio, helping it get strong interest from the Lynch model.

It gets strong interest from the Martin Zweig-based strategy, which likes that its earnings growth is strong and accelerating (362 per cent last quarter, versus an avg of 72 per cent in the three previous quarters, versus 47 per cent long term)

The company has no long-term debt, which the Lynch, Zweig, and Fool models love.

Anika has a strong 37-per-cent return on capital, using the EBIT/tangible capital employed metric the Joel Greenblatt-based model uses. And it has a 14.7 current ratio, a sign of great liquidity, according to the Benjamin Graham-based approach.


John Reese is long ANIK.


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