Value Microcaps Motherboard

[Knowledge is King]

Added a few PCHM($.20); perhaps most-undervalued stock I own...


This very obscure drug-testing company (finally) reported FY14 results this week and they continued a nice trend: net sales were up 42% to $2.5M, net income almost tripled to $434K, and EPS came in at $.07.

The balance sheet is a thing of beauty, with cash-per-share of $.27, no debt, and book value of $.28/share.

You'll notice I said FY14 results, but the shareholder letter linked here

https://materials.proxyvote.com/Approved/717133/20151209/SHLTR_266761.PDF

gives a very nice overview of current business and finishes with a sales growth forecast of "double-digit increase in 2015". Assuming the bare minimum 10% increase and constant margins, I calculate that PCHM will earn about $.09/share in 2015, suggesting a P/E of about 2. Backing out cash and investors are being paid to hold shares in a growing healthcare segment.

Finally, the shareholder letter makes clear that the company is for sale. Management says:


As previously discussed, merger and acquisition activity remains one of the Company’s highest
priorities. The Company is not waiting for an exit opportunity to arise; rather, it is proactively
seeking to present PharmChem, Inc. and its strategic value to the few larger entities that can
benefit from acquiring the Company at the appropriate valuation.