Repro Med Systems Inc (REPR)

[quilix]

I sold out of my position about a week ago. I think the stock is fully valued at .40 cents a share. The only scenarios I see for further upside are the company gets bought out or management starts performing better than they have in the past. As I mentioned in my previous post, Revenues have grown tremendously over the past 5 years but profits have not:

2010 2011 2012 2013 2014 TTM
Revenue 3.78 4.92 6.39 7.76 8.7 9.96
Gross Profit 2.51 3.26 4.14 4.95 5.31 6.1
SG&A 1.7 1.97 2.66 3.54 3.85 4.12
EBITDA 0.78 1.3 1.42 1.26 1.25 1.57
Oper. Income 0.72 1.2 1.29 1.06 1.01 1.31
Net Income 0.89 0.7 0.82 0.73 0.7 0.9

Every year there is the hope that the revenue increases really will fall to the bottom line and every year they get sucked up by increased SG&A. Management clearly isn't running this to maximize shareholder value. At $.25 I still saw upside even given that but at $.40 it is less clear.

Also I don't trust management to execute on new product development. So far they are a one hit wonder where demand for a product they invented arose from subsequent developments that they couldn't have predicted ahead of time. I believe this is the original patent which IP is contained in the Freedom60 - it was filed in 1984: http://www.patentgenius.com/patent/4447232.html. Also as noted in the comments of the last seekingalpha article on this company they didnt even create the working product - Creative Engineering did: http://www.creativeengineering.com/medical-healthcare/infusion-pump/.

The firm has been ripe for a buyout for years given the increasingly bloated SG&A and it hasn't happened so I am not going to wait around for that. Also, managements renewed interested in product development says to me they aren't looking to sell the business and get out. I am also not excited about the nepotism (CEO naming his son to the board).

So upside only comes if management either starts acting differently and reducing SG&A or they manage to pull of a success with a new major product. I don't believe in the company enough to do either to convince me to buy shares at $.40 so I won't hold them there either.

Of course it is possible that the company slowly progresses going forward - if SG&A growth just slows down relative to revenue growth other time more money will trickle down to the bottom line. But revenue growth isn't guaranteed either.

Best of luck all