A Windfall From Workers' CompBy
No, Work Recovery (WORK) isn't a program Newt Gingrich wants to cut. It's a stock that soared from 2 to 61/8 in just over a month. Its move is "far from finished," insists a New York money manager who bought at 2. "We expect it will double from here as [the company] gets more contracts."
All the fuss is about the flagship product--ERGOS Work Simulator, a software-driven system that does two critical tasks: sizing up a worker's ability to perform essential jobs, and, in the event of injury, determining when a patient might return to the job.
Demand for ERGOS is being spurred by exploding workers' compensation costs, says Ken Peterson, an analyst at The Red Chip Review in Portland, Ore. "Each year, U.S. businesses and governments lose as much as $80 billion in lost wages, lost productivity, climbing insurance premiums, and fraudulent claims," he notes. So Work's products, designed to contain and even roll back workers' comp costs, is welcome news, he says. Apart from ERGOS, Work makes machines that provide exercise to an injured worker as part of work therapy. The company also runs a network of 38 testing clinics.
The stock caught fire when big contracts for ERGOS rolled in. One was from Wayne-Oakland Medical Centers in Detroit on June 1. Another was from the State of California, which wanted limited testing on the Social Security disability claims it processed.
On June 27, Work agreed to set up Work Recovery Far East to cover such nations as China, India, and Thailand. Work Far East expects to generate $14 million in licensing fees and $16 million in ERGOS sales over two years.
Red Chip's Peterson estimates fiscal 1995 sales will jump to $37.3 million, up from $24.6 million in 1994. Next year, he expects sales of $53 million. The analyst sees Work making 30 cents a share this year and 40 cents in 1996, up from 17 cents in 1994.