Published Tue, 07 Nov 2017 15:00:25 -0500 on Seeking Alpha
Digirad's (DRAD) balance sheet and businesses remain healthy enough to cover its hefty dividend and provide enough cash to execute its growth strategy, making it an undervalued buy at present prices. However, choppiness in results, the loss of its Phillips contract, and management's lack of specificity concerning their path forward towards growth make DRAD a speculative buy.
Though the quarterly results continued this year's trend of declining year-over-year results in revenue, GAAP earnings, and free cash flow, non-GAAP earnings per share actually grew by 40% and total debt and liabilities are down year-over-year. Furthermore, the company continued to generate more than enough free cash flow to cover their sizable dividend (currently yielding ~9%) while financing their credit facility and business operations. The biggest positive from the earnings call was that the company clarified the impact of the Phillips contract cancellation, indicating it was much less than initially feared by the markets and that it would not impact their ability to finance acquisition-related growth moving forward:
We have discussed the impact of the Philips cancellation on our overall business with Comerica, our banking partner and the result of the conversation there were no concerns.
As further demonstration of their confidence in the company's ability to continue generating plenty of free cash flow, the company reiterated their commitment to their dividend and declared one at... Read more
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