PhotoMedex, Inc. (PHMD) reported its third straight quarter with a positive earnings surprise in November, amassing an average beat of 68.9% in that time. This Zacks Rank #1 (Strong Buy) skin care company has been enjoying strong earnings estimate revisions since its third-quarter announcement, which included an improved revenue guidance.
With an impressive valuation, including a P/E ratio of 11.5 and a price-to-book (P/B) multiple of 2.0, the stock offers a promising proposition for value investors. The company is expected to report fourth quarter results on Mar 4.
Third Quarter Results
On Nov 7, 2012, PhotoMedex reported adjusted earnings per share of 35 cents for the third quarter, beating the Zacks Consensus Estimate by 29.6%.
Net sales were $56.7 million, missing the Zacks Consensus Estimate by 3.7%. In the year-ago quarter, the company reported pro forma revenues of $42.9 million. On a headline basis, Consumer revenues were $49.6 million, Physician Recurring amounted to $5.1 million and Professional stood at $1.9 million. Within the larger Consumer unit, the Direct channel contributed $30 million of revenues, Distributors led to sales of $9.4 million and Global retail and home shopping generated $10.2 million.
Gross margin was 80.1% in the third quarter, versus pro forma gross margin of 70.9% a year ago.
Improved Revenue Guidance
On December 13, PhotoMedex forecast fourth quarter 2012 sales between $52 million and $54 million, versus its earlier guidance of between $46 million and $48 million. The new guidance suggests year-over-year growth of about 80%. For 2012, revenues will cross the $200 million mark for the first time at $218 million to $220 million, up more than 65%.
Earnings Estimates Moving Up
Both estimates for 2012 have been revised higher in the last 60 days, boosting the Zacks Consensus Estimate by 3.2% to 97 cents. This represents year-over-year growth of 321.7%.
Likewise, all three estimates for 2013 have advanced over the same time frame, sending the Zacks Consensus Estimate higher by 3.2% to $1.29. This implies a year-over-year increase of 33.3%.
Favorable Valuation
PhotoMedex trades at a discount to its peers by most metrics. Going by the usual indicators of P/E multiple below 15.0 and a P/B ratio under 3.0 for a value stock, PhotoMedex appears to be undervalued.
The trailing twelve-month return on equity of 18.5% is significantly better than the peer group average of 7.6%.
PhotoMedex's price performance has improved lately. The stock is currently trading above both its 50- and 200-day moving averages. PhotoMedex has rallied 7.7% in the last three months, compared with a 1.2% increase for the S&P 500.