I was almost positive nobody read anything I wrote regarding stocks but I've been contacted by a few people who have questions, comments, and warnings for me regarding my picks. My girl somehow found reality shows here and is watching a show where the plot is Denis Rodman making a total ass of himself so I thought I would do a semi complete write up as to why 60%+ of my investing roll is in VIFL. I do realize everyone who knows more than me about this stuff will come in here and own me but that's fine, maybe I will learn something.
VIFL'S business is radiating medical supplies and to a smaller degree, food products like spices and vegetables with cobalt 60. They run the stuff by the radioactive material and that kills all the bacteria. Easy game.
VIFL has a market cap just under 14,000,000, a very small company. This means a few things...
* Less cash, they could go under easier.
* Seems more likely someone crooked is reporting the wrong numbers.
* If someone sues them or something they have less money to deal with it and don't employ a host of lawyers or anything.
* A ton of other risks as well, some of which are listed in their annual reports if you care to read it.
The small market cap also means people with a lot of money are not investing in this stock. It's too small and it's size excludes it from a lot of stock screens smart, rich people run. So it could be largely overlooked.
Moving on...
It's (probably) cheaper to radiate stuff compared to other sterilization methods like steam. How do I know this? I'm just guessing. VIFL's profit margins are over 30% so they are either the cheapest option/method for serialization or there is zero competition (more on this soon).
VIFL's nearest competitor is two states away.
The facility is limited in capacity by how much radioactive material they are allowed to have on site at any one time. The facility is currently funning at 40% capacity. What this means to me is I wont see a lot of money go to building a new radiating place for a few years at least. Profits will remain profits. There is no RnD, construction, or anything else they have to spend a lot of money on in the future. What about cobalt you ask? VIFL just purchased 500K worth of cobalt last year and that will last for quite a while. Prepaying for the cobalt and ordering such a large quantity actually got them a "significant" discount as well.
In the image below I'm going to point out a couple things...
*
Total Revenue has increased from 2.09mm to 3.01mm in four years. In 2009 you can see there was no growth in revenue. this was due to the loss of a client (the client moved) that represented 30% of their total revenue for the year. Had the client not moved there would have been better results for that year. This type of thing is just another risk with a small company who has clients that rep such large % of total revenue.
*
Total operating expense is the next thing I want to look at. It's not only important that VIFL makes more money each year but that they also keep what they earn. VIFL is a business of scale (idk if thats a real term). What that means is VIFL's cost of revenue will be a smaller and smaller % of
total revenue as they grow. We can actually figure out if this trend is occurring by doing some simple math (i think). Just divide
total operating expense by the
total revenue of the same year. Do that for all four years and you should see a slow reduction in costs.
* We can also check and see if growth is slowing down or speeding up with the help of a high school education or, in my case, a
compound annual growth calculator. I'm not sure of the value of this but it's fun to do.
1. Put the beginning value of operating income into the thing (.23mm).
2. Input the ending value (1.09mm).
3. Enter "4" as the number of periods.
The thing spits out a result of 47.55%. This is with the loss of 30% of their revenue in 2009.
The next step is to compare growth quarter over quarter. I don't want to upload a new screenshot but you can check it on googlefinance or trust me.
1. Beginning value is .15mm
2 Ending value is .27mm
3. There are only 2 periods this time so enter "2" into that box.
Here we can see a growth rate from Q4 of 2009 to Q4 of 2010 is 34.16%. A slower rate of growth that we would hope for but still amazing. I think some of this slowdown in growth is due to the purchase of 500k of cobalt in 2010.
You can do this type of thing with a lot of numbers in financial reports. Another thing I enjoy doing it for is profit margins. If profit margins are gradually expanding or contacting it's good to know and easy to figure out. The main issue with this type of thing is you need to know about stuff like a purchase of cobalt equal to 1/28 of the companies total market cap, for example.
Moving on...
This next section is going to focus on the
balance sheet or bank account of the company. Some things to keep in mind...
* Generally speaking an increase in assets is good.
* Decreases in debt are good
* Decreases in liabilities are good.
* An increase in cash is good.
* An increase in
total equity is a must imo but some stocks seem to do well without it (!?). Equity can be created by paying down debt, increasing revenue at a greater rate than costs, and other ways as well. Equity is basically where your money is, where the value of the company is... I'm not talking about branding and all that. I just mean it's what the company has left over after paying all it's debts. So if I had $50 and owed people $20 my
total equity would be $30... if I was a company.
LINK TO BALANCE SHEET FOR VIFL (click annual)
So a couple key stats...
(These stats are listed in the order they appear on the balance sheet)
Cash on hand has grown by 5X in 4 years. making the company more financially sound.
Total assets have increased from 5mm to 7mm. You can actually see the bulk of this increase occur in 2010 with the huge purchase of cobalt. Interesting to note they did not end up with less total cash than they had in 2009 despite this purchase.
Total current liabilities have decreased from .85mm to .03mm!
Debt has been $0 for 3 years. very nice.
Total common shares outstanding have remained flat at 2.75mm for the last 4 years. This is good and something worth discussing. If I sell you 1/100 of Leggo at a time when Leggo is worth $100 then fair market value is $1 for that share. After I sell it to you I decide to create another 100 share and sell them for $.50 each to raise capital, you got screwed... not screwed but it's sure not good!
So everything on the balance sheet implies a very strong and healthy company. There are no red flags.
Conclusion. (kinda)
I did not mention some things in here because this is already an epic post that maybe .75 people read all the way through....
