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Part I: One Man's Trash Is Another Man's Treasure - MedClean Technologies (OTC:MCLN) PDF | Print | E-mail
Written by M.E.Garza
Tuesday, 01 December 2009 04:26
Let's start with the worst kept secret on the Internet. Yesterday, our subscribers were issued a trade alert about this week's profiled company, MedClean Technologies (OTC:MCLN).
The company enables hospitals and other medical facilities to treat and dispose of their regulated medical waste and provide HIPAA-compliant destruction of confidential documents in an efficient, compliant, safe and cost-effective manner. If you haven't seen the video if their state-of-the-art on-site treatment system, please take a look at it on the right before reading further.
Within minutes of our posted alert, some of those subscribers among you began to post messages about the pick on forums and message boards across the web.
This happens every time we post an alert, regardless of when the information is released, but because this stock has so many eye-balls on it, the palpable excitement grew into something we had never really seen before.
Prices gapped up significantly as the market prepared to open and as the echo of the opening bell faded, the strength of the stock grew in not only momentum and incredible volume, but price as well.
It started out like many of our other profiled picks- reaching a morning high of nearly eight cents- almost double where it had closed on Friday, but instead of trading out before the "overbought" equity turned, investors held on as the price polarity shifted.
At the end of the day, according to many of the angry e-mails and messages that were passed along, our "over-hyped pick was pure garbage."
As writers who cover the sector, some claim that we can control many things, but two of the things we definitely can't control are the buy and sell buttons of our readers.
If we could, perhaps there would be more winners than losers among us, but then again we must remember that it's called a trade and almost by definition, someone will always walk away more happy than another. In the market, someone always holds longer than they could have and someone always sells before they should have.
Was Monday's incredible trading action that saw over a quarter of a billion shares change hands garbage or greed?
If you were one of the ones who feels you got caught holding the bag, then the answer may seem obvious- yet the matter is definitely quite debatable. Some hands, without question, were even shaken out of their shares by fear of a mad rush to cash out huge profits.
Amazingly, Monday's scoreboard showed that the stock closed mere fractions of a cent from where it closed on Friday's previous market session (-$.0073), but in the world of pennies, even the slightest percentages losses can quickly add up.
We understand that in today's market, most investors are in for a quick buck. These days, the impatient investor is more common that anyone would like to acknowledge in the biotech sector- a sector that had historically been home to some of the most patient investors on the street.
At the end of the day, the score card shows something else, however.
Some among you, who had been holding shares since they were priced at tenths of a cent made their money and moved on with big smiles on their face. They're in for a very merry holiday season, it would seem.
Others, added even more shares to their portfolio on today's dip and smiled into the evening sunset.
Self included.
Why, after all, should they sell their significantly vast amounts of MCLN shares at a vastly undervalued six, seven, or even eight cents?
As I mentioned in my alert to subscribers, this is a stock that just emerged from sub-penny levels, yet to some it may come as a shock that I continue to stand firmly behind my estimated a short term value target of $.40 per share.
"You've lost all credibility," writes another.
Maybe so, but those of us who carefully researched this company, spoke to their management group at length and looked carefully through their books and track record still feel not only bullish about this company, but extremely so.
If this were a glorified pump and dump scheme, then there are many of us who are still enthusiastically waiting to for the perfect opportunity to dump- and that is more along the lines of driven, calculated investing, we think.
Maybe we have lost our marbles, but the fact that paid subscribers feel compelled to share our picks is a two sided issue that we are wrestling with. On the one hand, if the information were worthless, then no one would care or even give the shortsighted and simple-minded actions a second thought. On the other, that brings me- in my own long winded way- to tell you about MCLN. This is rare penny level OTC entity that, we can assure you, is a real company, selling a real product, with real value and income, run by a real management team with tremendous experience that are all working hard together to fulfill real orders and contracts in a sector of the market still looking for a real leader to meet a pent up demand.
"Most of our competitors are mom and pop type shops," says Scott Grisanti who recently transitioned from CEO to Chairman of the Board of Directors for MedClean.
Even more compelling is the fact that this sub-sector (regulated medical waste) features companies whose market cap and trade values are most often based not on three or four times trailing twelve months (TTM) revenue and earnings, but actually fourteen to twenty five times those figures!
See sector leader Stericycle, Inc. (NASDAQ:SRCL) for a high mark example of that valuation analysis. SRCL's shares trade at over $54 per share. On the low end, you may want to examine Sharps Compliance Corp. (OTC:SMED) whose shares trade at over $9 per share.
Are you understanding the undervalued message yet? If you control a million shares or more of this company, you are in very good company.
This isn't the bottom of the final inning with two strikes and two outs. This ballgame is just getting started. Pitch number one just zoomed by. For some it became a home run. For others things are just getting warmed up.
The MedClean story, itself, gets better.
Through a recently announced partnership with the privately held Vestara, the Irvine, CA based provider of technology to automatically identify, sort, and segregate hazardous and non-hazardous pharmaceutical waste into proper streams, MedClean Technologies is showing some tells that they may be looking to establish a strong presence in the equally lucrative and under-served pharmaceutical waste management sector as well.
Already MedClean's solutions provide significant advantages for hospital customers compared to other approaches. These include lower costs, reduced risk and protection of host communities and overall better environmental solutions.
A single MedClean Container system can treat 1 million pounds of regulated medical waste per year, in addition to handling confidential document destruction (such as medical records), with a smaller footprint compared to multiple vendors handling different tasks for a hospital.
As one might imagine, the sales and orders for these cost, time and money saving systems are piling up.
Earlier this year in fact, MedAssets, Inc. (NASDAQ: MDAS), the $23 per share company whose group purchasing organization partners with hospitals and health systems to help improve quality and lower costs within the U.S. healthcare system awarded a contract to this penny stock company, and while specific financial details of the lucrative contract have yet to be completely revealed, it's safe to assume that the contract has enhanced the company's financial strength. After all, MedAssets runs one of the nation's largest group purchasing organizations (GPOs) and it helps to facilitate not only sales but leases of the equipment.
"Our manufacturing and installation bandwidth is running at full capacity," says David Laky, President and Chief Executive Officer of the company, "but that's a nice problem to have and we're actively making changes to accommodate more orders."
"We're excited about the collaboration with MedAssets and they have definitely enabled us to provide our solutions to an expanding base customers,” adds Chairman Grisanti.
The leaders appear particularly proud that their system meets the stringent and rigorous requirements of MedAssets as well as the tough regulatory requirements for processing medical waste in many states, including New Jersey- where customers in both the pharmaceutical and medical fields are required to minimize liability and protect the environment more strictly than just about any other state in the country.
In May, following a joint authorization issued by the state Department of Environmental Protection and Department of Health and Senior Services, MedClean was approved to provide New Jersey state hospitals with their systems following one of the most rigorous review processes and the first such approval for an on-site hospital system granted since 2005.
This was yet another in a series of victories for the group since their official launch of the company’s integrated business plan to emerge as the leader in the 2 billion market while transforming themselves into MedClean Technologies from their previously named Aduromed brand.
As part of that transformation, earlier this month, the company announced a restructuring of their management team. Laky was promoted to President and CEO as Grisanti transitioned to Chairman of the Board. Joseph Esposito, a key figure and accomplished leader of the group MedClean's past Chairman, remains on the board as a director and continues to serve as a consultant to the Company. Since that time, the company went from posting a loss of $7.8 million in 2008 to becoming cash flow positive on an EBIDTA basis in the 3rd quarter of 2009- marking impressive Third Quarter Revenue Increases 108% Year-Over-Year.
Tomorrow, in part two of our special report on the company, we're going to dive much further into our conversation with the unique management team- who actually share ties from their days at eResearchTechnology, Inc (Nasdaq:ERES). During their tenure there, the company's market valuation grew from $27 million to a peak of $1.5 billion, receiving recognition from Fortune Magazine as the number two fastest growing company in America and helping the company become the industry leader in safety drug research for biopharmaceutical, Contract Research Organizations (CROs) and medical device companies.
In the meantime, let's take a closer look at yesterday's trading action.
At first glance, it appears that the parabolic moves in share price for the stock may have signaled and end of the trend, but we have not really seen a verifiable sharp reversal in direction here.
Every stock has to breathe and there is no doubt that share prices which rise faster and faster can not sustain that sharp upward rise, since profits are being made very quickly and must be at some point taken.
The jury, in fact, is still out and how quickly this stock will grow another set of legs to take it up further will become more clear by the end of today's session, it may even become quite clear in the first thirty minutes of trading.
Fundamentally, the stock is very sound. Technically, we leave you with two different looks at the chart analysis. Click here to study the first one and here to view the second.
Remember also that MCLN has been on the SEC's Regulation SHO compliance tool list for over 20 consecutive days and is now high on the market maker's "buyin imminent" list. In our opinion, continued volume will finally force the market makers to cover and help fuel prices as demand exceeds supply. See this link for more information: http://www.buyins.net/tools/short_list.php?dys=%3E12
As always, we urge you to do your own research and wish you only the best in your trading and investing.
Batter up!
Disclosure: Long MCLN
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