Meridian Bioscience (VIVO)

A beautiful picture of steady revenue growth from $65.9 million in 2003 to $123 million in 2007 and $128.1 million in the trailing twelve months [TTM] can be painted here. Earnings during this period have also steadily improved from $.21/share in 2003 to $.66/share in 2007 and $.70/share in the TTM.

The company also pays a dividend (!) and has been steadily increasing that payment from $.15/share in 2003 to $.40/share in 2007 and $.43/share in the TTM.

Outstanding shares have increased under 25% from 34 million in 2003 to 41 million in the TTM. During this time, revenue has grown almost 100%, and earnings are up more than 200%. This is an exceptable dilution in light of these fabulous results. Free cash flow is positive and growing from $16 million in 205 to $23 million in 2007 and $27 million in the TTM.

The balance sheet is gorgeous with $49.0 million in cash, which by itself could pay off both the $15.6 million in current liabilities and the $2.6 million in long-term liabilities combined, more than 2x over! Calculating the current ratio, we find that Meridian has a total of $97 million in current assets, which compared to the $15.6 million in current liabilities yields a current ratio of 6.22.

WARNING: The consideration of this stock can only be done with an understanding that we're in a bear market. Please carefully consider the downside risks mentioned in this research recommendation before taking any actions. Despite the qualitative nature of this company, the purchase of this stock should be considered speculative at this point in time.

As I mentioned in my sell recommendation of Helmerich and Payne (HP), I have been anticipating the opportunity to buy Meridian Biosciences (VIVO) for over 3 years now. According to Morningstar.com, VIVO, "...manufactures disposable immunodiagnostic test kits used for the rapid diagnosis of infectious diseases. Its products aid in the diagnosis of gastrointestinal infections, mononucleosis, ulcers, urinary-tract infections, respiratory infections, and strep throat."

As a Dividend Achiever, VIVO has increased its dividend every year for 16 years in a row according to MergentOnline. Yesterday March 25th, VIVO plumbed a new low after reaching a peak of $37 in April 2008. According to Dow's theory, VIVO has the following upside and downside targets:

Upside-

   *$23.33
   *$30.16
   *$37.00

Downside-

   *$11.29
   *$ 5.65

Again, considerable attention must be directed at the prospect for the downside risk since we are in a bear market. Anyone buying this stock should be willing to accept that this company can easily go down to the $11.29 or $5.65 level or a loss of 38% and 69% respectively.

The fundamentals about this company are exceptional like little debt, double digit return on equity and return on assets and an astounding dividend growth rate. Your research of this stock might convince you to buy right away. However, the biggest red flag warning about this company is that the dividend payout ratio is very high at 91%. At some point this has to start going lower or the company may have to dip into it's cash reserves, borrow or cut the dividend altogether.

Aside from all the homework that you have to do before you consider this stock, I would like to draw your attention to the comparison chart below of VIVO's stock price to that of Google (GOOG). While these companies are in unrelated industries both GOOG and VIVO appeal to investors as demonstrated by the eerily similar stock price movement. From the IPO of GOOG back in August 19, 2004 to the most recent peak, GOOG and VIVO appreciated 639% and 665% respectively. However, when the downturn came GOOG fell hard and fast down 67% at the low while VIVO is down 56% from the high. The distinction, of course, is that VIVO will pay a portion of earnings to you the shareholder while it struggles through this economy and GOOG will only promise that things are going to get better as the shareholders hope that the price will go up.

I have bought shares of this company for the long term if the stock falls. While you're doing your research of this company, it is hoped that this stock continues to fall so that you can get a better price than mine. As with my purchase of HP, if VIVO miraculously increases in value, I will consider selling only if my gain has been exceptional and a better alternative presents itself at the same time. If you're unclear about my investment philosophy and approach please review my "About This Site" section. Touc.