Stock Idea...Atrion Corp...ATRI on the Nasdaq
Recent results have been weak due to the Covid-19 Pandemic presenting an opportunity to buy a good stock cheap.
Business Description
Atrion Corp develops and manufactures products for medical applications. Its fluid-delivery products contribute the largest proportion of revenue and include valves that can hold and release controlled amounts of fluids or gases and are often used in anesthesia and oncology applications. Atrion's cardiovascular products include the MPS2 Myocardial Protection System, which delivers fluids and medications, mixes drugs, and controls temperature and pressure during open-heart surgery. The cardiovascular business also sells cardiac-surgery vacuum relief valves, inflation devices, and other products used in heart surgery. The firm's ophthalmic products include medical devices that disinfect contact lenses. Atrion generates the majority of revenue in the United States.
Atrion Corporation (Atrion) is engaged in developing and manufacturing products, primarily for medical applications. The Company's medical products range from fluid delivery devices to ophthalmic and cardiovascular products. Its fluid delivery products include valves that promote infection control and needle safety. It has developed a range of valves designed to fill, hold and release controlled amounts of fluids or gasses on demand for use in various intubation, intravenous, catheter and other applications in areas, such as anesthesia and oncology. Its cardiovascular product, MPS2 Myocardial Protection System (MPS2), is the system used in open-heart surgery that delivers fluids and medications, mixes critical drugs and controls temperature, pressure and other variables. The Company manufactures specialized medical devices that disinfect contact lenses. Its other medical and non-medical product lines consist of instrumentation and associated disposables.
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From the company's website...
Highlights:
Atrion’s ability to generate strong cash flows is a key strength that enables the company to deliver consistent growth and profitability and to support ongoing R&D and capital improvements in technology, facilities and equipment. Over the past several years, these investments included new manufacturing machinery and equipment that enhance our ability to meet customer needs with even greater quality, flexibility and efficiency. Our consistent generation of cash flow also enables us to invest in value-creating initiatives such as stock repurchases and dividend payments.
Despite fluctuations in markets, product demand, and the economy, the company has continued to return value to stockholders through consistent, strong earnings growth. Over the past twenty-one years, Atrion attained annual compounded rates of growth of 6% in sales, 17% in operating income, and 20% in EPS—all of which we achieved organically rather than through acquisitions. During this same time period, the company’s stock price increased from $8.00 per share to over $700 per share.
Our return on equity has also steadily increased from five percent in 1999 to 16 percent in 2019. From 1999 to 2019, we repurchased over two million shares of our stock and consistently executed the timely repayment of debt associated with these buybacks. The Company has no outstanding debt as of December 31, 2019. At December 31, 2019 our cash and investments totaled $100.6 million.
Summary:
Although Atrion is a relatively small company in the medical products arena, a number of our products hold leading market positions in their respective niches, creating a stable and diversified revenue base.
Atrion's presence in the healthcare and medical products industry is based on providing devices and components to niche markets that offer significant opportunity for product development, market penetration and revenues growth. We work to enhance our position in the markets we serve by:
- Focusing on customer needs
- Expanding existing product lines and developing new products
- Maintaining a culture of controlling cost
- Preserving and fostering a collaborative, entrepreneurial management structure
As a result of this strategy, a number of our most successful products hold the leading market positions in their respective niches, demonstrating that small markets can produce attractive returns. For example, Atrion is a leading U.S. manufacturer of soft contact lens disinfection cases, clamps for IV sets, cardiac surgery vacuum relief valves, minimally invasive surgical tapes, check valves and balloon catheters for the treatment of tear duct blockages. Atrion is also the leading manufacturer of valves and inflation devices used in marine and aviation safety products.
To respond to new market opportunities, we make research and development a continuing priority. During the past five years, we invested $73 million in manufacturing and quality assurance equipment to further bolster our position for the long run.
Supporting a successful and diversified product line is a commitment to financial flexibility and strength. Atrion maintains a steady and consistent focus on managing assets wisely, making products that meet specific market needs, and improving productivity and profitability. As a result, we have delivered consistent growth in earnings per share from continuing operations, while funding the needs of the business and investing in the resources, technology and assets to ensure operating efficiency and fuel future growth.
Atrion has approximately 400,000 square feet of manufacturing, research and development capacity in three facilities in Alabama, Florida and Texas. We continually upgrade the manufacturing technology in our plants - automating processes where possible to maximize efficiency and quality control. The result is a seamless development and production system that can respond to new and increasing customer demand.
Atrion is committed to creating continuing value for stockholders. In recent years, the company has completed several stock repurchase programs, aimed at enhancing stockholder value. Since 2003, when we initiated the payment of quarterly dividends on our common stock, we have increased the dividend sixteen times. In August 2019, we boosted the quarterly dividend from $1.35 per share to $1.55 per share.
The development of new products to meet market needs is an ongoing strategy of the company's. Atrion has developed a line of swabable valve products that minimizes the risk of needle-sticks for medical personnel, and the MPS2®, the second generation of our Myocardial Protection System. The MPS2 is a proprietary technology that delivers essential fluids and medications to the heart during open-heart surgery providing increased flexibility to the surgeon and enhanced safety to the patient.
Our company's goal is to continue to build its presence in the medical products industry by leveraging our leadership position in niche markets and by developing new products to meet increasing customer demand for effectiveness, safety and cost. Atrion is committed to building value for the company and its stockholders through continued growth in earnings per share.
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ATRION 2019 Letter to Stockholders
It is my great pleasure to report to you on the progress we made in 2019, and to speak to strides we are focused on making in 2020.
Performance
In 2019, our earnings per share grew 7% to $19.73. We increased our dividend by 15%, the sixteenth consecutive year of double-digit increases. Our operating margin was an enviable 26%, reflecting the focus on operating efficiently and effectively. Sales were up slightly—just 2%, in part impacted by a nationwide shortage of contract sterilization capacity. Our cash and short- and long-term investments increased over 12% to $100.6 million at the end of the year, and we remained debt-free.
Discovery
Whether developing products to combat illness or to increase survivability in marine and aviation emergencies, exploration of new ideas, materials, and manufacturing techniques underlies our work.
The third generation of our Quest Myocardial Protection System (MPS 3) received regulatory clearance in Canada at the end of 2018, and a limited market release was conducted there in 2019. This console and its related disposables represent the most complex new product program in our history. This successful effort—ranging from writing millions of lines of software code to seamlessly integrating electrical and mechanical systems—has greatly expanded the capabilities of this uniquely powerful platform. We anticipate our MPS 3 receiving FDA clearance, and being introduced in the U.S., later this year. This introduction will further advance our status as the market leader in this clinical niche.
Central to this effort and the many others we undertake each and every year is an extremely talented team of experts in the sciences, engineering, manufacturing, and quality assurance, as well as support services and an incredible production team.
Acceleration
Our approach to growth is rooted in continuously investing in our people, products and new manufacturing technologies. Over the past year, the pace of new product development and launches increased—a trend that we expect to continue in the years ahead. We currently have over two dozen products in various stages of development. As they come to market, they will help us expand our market share. We also invested record amounts of capital in manufacturing technologies in both 2018 and 2019 to ensure the highest levels of quality and efficiency.
In 2019, we increased our focus on talent discovery, development, and management to shape our next generation of leadership, and we are continuing to focus on those aspects of our business this year.
These investments in people and products are aggressive, and they are key to solidifying the foundation of our work. However, at the same time we continue to manage the Company in the fiscally conservative manner that has guided our approach for years.
Appreciation
At the time of this writing, we are greatly concerned about the COVID-19 pandemic. To protect the health and safety of our employees, we are closely monitoring the guidance provided by the Centers for Disease Control and Prevention, and, at the same time, we are mindful of our special responsibility to supply hospitals with critical products that will be needed for various illnesses. Any breaks in the supply chain to hospitals will have profound implications for the critically ill. I do not know what tomorrow will bring, but I am extremely grateful for the courage and grace of my co-workers who are working with great dedication.
When we released our earnings for 2019, we predicted 2020 would bring high single-digit top line growth and low double-digit operating income growth. Whether the COVID-19 contagion will affect this outlook or the timing of regulatory approvals for new products is unclear at this time. Regardless of whether our results are impacted, at Atrion we focus on sustainable growth and responsible management. Our priority is to ensure the Company’s growth over the long term, not just on achieving certain results for a specific calendar year.
I am grateful to you, our stockholders, for your continued support,
David A. Battat, President and CEO
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Comments from BNN-Bloomberg Contributors
Atrion Corp. (ATRI NASD) - Last purchased on August 10, 2020 at US$663...Aug 25, 2020, David Driscoll
Atrion is a leading supplier of medical devices and components to niche markets. Atrion’s proprietary products, ranging from cardiovascular and ophthalmology products to fluid delivery devices, are sold to end-users and distributors worldwide. The stock has traded at its current price level since mid-2017 as revenues have temporarily flattened. However, the company has new products to introduce in 2021 and it just raised its dividend 13 per cent to US$7 a share on higher expectations.
ATRION (ATRI.O)...July 29 2019...Brett Girard
This Texas-based small-cap medical device company offers niche products in the fluid delivery, cardiac and ophthalmic categories. Management is keenly focused on free cash flow, with a healthy allocation to both R&D and dividends (it has a five-year dividend growth of 80 per cent and a 10-year dividend growth of 300 per cent). Relative to pharma patents on products don’t expire, making R&D and the reinvestment cycle more predictable and steadier. In 2018, when the small-cap Russell 2000 Index declined 12 per cent, Atrion was up 18 per cent. It’s traded lower in 2019 as investors take profits, but with no sell-side analyst coverage, this is an under-the-radar cash flow machine for years to come.
Company's Website
https://www.atrioncorp.com/about/
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