Published Thu, 25 Jun 2015 05:00:00 -0400 on Seeking Alpha
We believe that Digirad (Nasdaq: DRAD) offers a compelling risk/reward profile. It is a typical microcap in that it is essentially off most investors' radar screen. It is atypical in that it has a capable, disciplined management team and Board, a debt-free, cash-rich ($1 per share) balance sheet, strong cash flow that supports a 5.3% dividend yield ($0.05 quarterly), a diverse customer and geographic base, and enough critical mass that its business is an excellent platform for tuck-in acquisitions. With shares trading near lows not seen in over 6 months (since December 8th), we believe the shares are particularly attractive right now.Specifically, we believe the shares are attractive because:We believe management will maintain its full-year EBITDA guidance of $6.5-6.9 million when they report 2Q. Coming off a 1Q that was flat y/y, that implies meaningful y/y acceleration beginning 2Q - to hit full-year mid-point, y/y EBITDA growth must average 25% for the remainder of the year. This should screen well and could quickly drive shares higher.At $3.88, the shares are within $0.37 (9%) of what we believe is the ceiling on Digirad Chairman Jeff Eberwein's 10b5-1 insider purchase plan (on behalf of his fund, Lone Star Value Investors). Lone Star still has over 800,000 shares of the original 875,000 left to purchase. We'd be surprised to see shares drop below $3.51 (his highest filed purchase price).Digirad CFO Jeff Keyes exercised options twice in May, but didn't sell any... Read more
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