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Fonar: Not Too Many Reasons To Be A Buyer Anymore

Summary

Fonar continues to do well with its medical diagnostic business, but its MRI business is basically non-existent.

While its medical diagnostic business is the main reason the stock went to higher levels, I always envisioned higher MRI sales as well.

I am hesitant to buy a pure diagnostic company because I do not see the possibility of internal organic growth without an acquisition that will require additional capital.

  • Diluted EPS increased 33% to $0.53 per share for FQ2 '16 y/y.
  • Revenues for FQ2 '16 increased 8% to $18.4 million y/y.
  • Cash and cash equivalents increased 37% to $13.0 million at December 31, 2015, from $9.5 million at June 30, 2015.

So were these results good? Yes and no. Let me show you a chart:

FONR Revenue (Quarterly) Chart

FONR Revenue (Quarterly) data by YCharts

The company has not been growing for many quarters now. Unfortunately for FONR, while its diagnostic business has grown over the past quarters, its bread and butter business - selling MRI equipment - has bottomed.

Revenues from MRI product sales decreased 53.8% to $760,000 for the first six months of fiscal 2016, from $1.6 million for the first six months of fiscal 2015. Unfortunately, this is a trend that has been going on for some time now.

And while the diagnostic business is doing well and has been able to fill in the lower MRI sales gap, the truth of the matter is that, for me at least, MRI sales are the most important factor in determining if I would want to be a shareholder in this company.

The company...


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