(I know I know. So annoying but…) CAPS Pick: Heska Corp (HSKA)

December 17, 2010 § 3 Comments

Sorry for all the recent CAPS picks, but I am trying to populate the page and I don’t want to leave any of em untalked about. So it means a bunch of mini posts.

But let’s get down to business. My pick today is Heska Corp. They make vet products, like heartworm tests and lab equipment so that Fluffy and Mittens can live happy, productive lives. I picked it for CAPS because:

1. It’s at half book value

2. Their CROIC is pretty sweet at almost 19%. (CROIC stands for Cash Return on Invested Capital. So in this instance that means that for every dollar they borrow, they make 19% on it. If you borrowed a buck and made a $1.19 I’d totally let you take me to lunch, you genius you.)

3. Although they’ve had bad margins, they have stabilized these past 2 years. Let’s hope that trend continues. Same with Free Cash Flow. Now seeing as they are at a 52 week low, now’s a good time to make the pick.

I’m not really a big penny-stock kinda guy (HSKA is trading at $0.42 for the pick) but I do like a good CROIC producer at half of book value. Definitely CAPS worthy.

Full disclosure: Long on HSKA. But, I mean, let’s not go crazy. It’s like a super small position. In my view this is a low risk pick because of the cheap price. They either go bankrupt (doubtful) or they go up. I told myself that I would act on my common sense more and stop overthinking everything. Let’s see if I’m right.

EDIT: So you can’t pick HSKA in CAPS right now. Dunno why, but let the record show! HSKA at $0.42


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§ 3 Responses to (I know I know. So annoying but…) CAPS Pick: Heska Corp (HSKA)

  • Jae Jun says:

    I’ve had HSKA on my watchlist for a long time. But given that I didn’t do any work on it, I just kept watching it go down and still don’t know whether it is cheap or not.

    Got so many stocks to go through.. lol

    • batting450 says:

      I like em because of their strong balance sheet and the fact that they are uncomplicated–all they need to do right now is focus on selling some pet supplies. They’ve dipped below book, they’ve put up some years of positive FCF, current assets higher (slightly) than total liabilities. The only hurdle they have to clear is to sell stuff–nothing on their balance sheet will eat into their profits. They just need to go get some. People usually wont let Fido die without a fight.

      One point of worry tho: falling margins

  • batting450 says:

    Well, they reversed split today 10:1. Guess they don’t want to be de-listed? I’ve never had stock reverse split on me before, so that’s kinda cool. But this kinda smells like desperation (and gives it more room to fall…)

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