Inside Wall Street
THE PROGNOSIS IS GOOD FOR MEDEX
In these times of slumping profits, investors are eagerly bagging shares of companies that are bucking the tide. That's the big reason why Medex, a maker of a broad range of disposable medical products, including intravenous infusion equipment and specialized valves for dispensing blood and fluids for life-support systems, has been on the fast track.
Its sales and earnings have been shooting up each year for more than a decade. Since 1987, sales have risen at a compounded annual rate of 29%, to $65 million this year, and earnings in the same period have gone up at a 21% yearly rate, to $4.9 million, or 97~ a share. So Medex shares have been on the go, from 22 in July to 32 currently -- despite the market's recent decline.
With the stock now trading at a price-earnings ratio of 21, has Medex hit its peak? Money manager Chuck Allmon, who is a big Medex bull, says that although the hefty p-e "allows no room for error," the company's "long-term growth record is excellent." Analyst Elliott Schlang of Kemper Securities Group is even more bullish: Medex' current p-e is about equal to the company's projected growth rate -- "well in line with our strategy of buying fundamentally solid growth companies."
With the continued growth of its core business, Medex earnings should jump next year to about $1.50 a share on revenues of $110 million, says Schlang. He thinks the stock will rise to at least 42 over the next six months.GENE G. MARCIAL