OxySure Systems Inc. (OTCQB: OXYS), a global leader and medical device innovator of life-saving, easy-to-use emergency oxygen solutions with its “oxygen from power” technology and other innovative medical solutions, recently announced robust third quarter financial results. While many over-the-counter stocks fail to live up to expectations, the company’s strong performance suggests that the opposite may be occurring – below we will take a look at why many people feel that OxySure is currently undervalued.
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With a modest $5.5 million market capitalization, the company trades at just 1.57x trailing 12-month revenue and 1.8x book value. The medical device industry tends to trade at much higher multiples of between three and four times revenue. For instance, Sharps Compliance Corp. (NASDAQ: SMED), a small-cap developer of hypodermic needles, lancets, and other medical devices related to sharps disposal, trades at about 3.7x revenue.
OxySure Systems reported third quarter revenue that soared 39% to $1,138,380, gross profits that jumped 12% to $558,254, and shareholders’ equity that more than doubled to $2,180,918. The company was also able to close a $3 million institutional financing transaction, which when coupled with their 14th consecutive quarter of growth is a clear sign that OxySure is attracting the attention of large investors.
In addition to a solid financial performance, management announced a number of big milestones for the quarter, including progress towards an uplisting on the NASDAQ exchange and the launch of new products through key industry partnerships. The company’s Quickclot(R) product launch, for example, could compete with Arch Therapeutics Inc.’s (OTCBB: ARTH) AC5(TM) a technology designed to stop bleeding in emergency situations.
The company also laid a lot of groundwork for the future by adjusting its capital structure to accommodate the planned uplisting, adding new members to its Strategic Advisory Board, as well as securing commercial drone approval from the FAA for future products and services. With cash and cash equivalents that tripled to over $2 million during the quarter, the company is well prepared to execute on its growth plans and continue unlocking shareholder value.
OxySure Systems has fallen from highs of around $0.78 per share in January to lows of around $0.17 per share in November, despite posting strong top-line revenue growth and only a modest increase in the number of shares outstanding (see Figure 1).
Figure 1 – Revenue vs. Share Price – Source: YCharts
The company has managed to significantly increase its revenue – whilst growing its higher margin recurring revenue from consumables – and build shareholders’ equity to nearly $2.2 million – representing about 40% of its market capitalization. With plans to uplist to the NASDAQ and reach new institutional investors, investors may want to reconsider a stock that has been beaten down by short trading in the over-the-counter markets.
Many analysts covering the company seem to agree that the stock is becoming increasingly undervalued. In an August 2015 report, SeeThruEquity analysts established a target price of $2.30 per share, which represents a 1,253% premium to the current market price. RedChip’s report from the same month is slightly less bullish, with a price target of $1.90 per share, but that figure still represents a hefty 1,018% premium to the current market price.
Furthermore, the company announced that they are on track to reach a revenue run rate of $10 million in 2016. Further, the Company expects to be cash flow breakeven by mid 2016, and they plan on being GAAP breakeven by the end of 2016. For a company that has a 3Q 2015 annual run rate approaching $5 million and a market capitalization of just $5.7 million this is outstanding news that is worthy of attention.
Is OXYS a Perfect “CAN SLIM” stock?
Many investors believe that OXYS is a perfect “CAN SLIM” stock. CAN SLIM refers to the seven-pronged mnemonic publicized by the Investor’s Business Daily, which claims to be a checklist of the characteristics performing stocks tend to share before their biggest gains. It was developed by Investor’s Business Daily editor William O’Neil who has reportedly made several hundreds of millions of dollars by consistently using its approach. CAN SLIM is a growth stock investment strategy formulated from the study of the 500 best performing stock market winners dating back to 1953 in the book How to Make Money in Stocks: A Winning System In Good Times or Bad, 3rd Edition (May 23, 2002) ISBN 0-07-137361-6. by William J. O’Neil. This strategy involves implementation of both technical analysis and fundamental analysis.
OxySure’s third quarter financial results show continued success in rolling out its core products across educational markets, while management has made great strides in introducing complementary products through partnerships.
With accelerating top-line revenue, growing profit margins, and progress made in reaching new institutional investors via an uplisting to the NASDAQ, investors may want to take a closer look at the microcap stock that has seen tremendous selling pressure over the past year. Analysts seem to agree that the market will eventually realize that the stock has been oversold, judging by their 12-month price targets, while the fundamentals behind the company are growing increasingly attractive.
Biotech investors should take note of how companies like CytoSorbents Corp. (NASDAQ: CTSO) and Invivo Therapeutics Holdings Corp. (NASDAQ: NVIV) successfully transitioned to the NASDAQ and generated significant value for their shareholders – OxySure could be the next over-the-counter company to do the same over the coming quarters.
For more information, visit the company’s website at www.oxysure.com.