deathtotaxes: NHRX
I see what probably sparked the huge volume and price increase today. The US Govt announced that nine companies won approval to offer medicare prescription drug benefits to seniors starting in January, and one of those companies was Cigna - who is their partner.
According to one article I just read on Reuters, it says that 28 to 30 million people are expected to sing up for the new part of medicare - and although people can start signing up on November 15th, these companies can start advertising on October 1st - just a few days from now.
This is probably way too simple of an analysis, but if nine companies can offer the program, and each get equal market share (obviously a silly assumption) that would be about 3.1 million people. If Cigna gets their equal share and NHRX is the provider to Cigna, then NHRX should get the 3.1 million people.
In a recent investor presentation posted on their website, they are indicating that 1 million enrollees would give them a pretax profit of $36 million and that 1.5 million would give them $54 million. So, 3.1 million would probably give them over $112 million in profit if that were achieved.
They have 42 million shares outstanding on a fully diluted basis and will have $16 million in cash from the sale of their division to use for this new opportunity. If they actually got 3.1 million enrollees, that could generate pre tax profits of $2.67 a share!?! Give that even a 15 multiple and you might get a $40 stock price...sure maybe in 2-3 years for all that to happen, but the stock is under $8 now. If they sign up half of what it seems like they should, then that should still generate about $1.34 in earnings and possibly a $20 stock - still an excellent possible return.
Your thoughts?
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