Acquired by OPKO HEALTH in 2015, Bio-Reference Laboratories was a clinical testing laboratory offering testing, information and related services to physician offices, clinics, hospitals, employers and governmental units.
A company creates wealth for its long-term shareholders in 2 main ways - through dividend payments and through the accumulation of retained earnings. This graph shows the accumulation of per-share equity of long-term shareholders (green bars), which consists of the retained earnings plus all capital invested in the company, and the cumulative dividends the company has paid over time per share of its stock (blue bars).
In the words of Warren Buffett: "We're looking for... businesses earning good returns on equity while employing little or no debt."
Return on equity is a key metric of financial performance, indicating a company's ability to generate earnings using shareholder capital. Over time, ROE is one of the major determinants of the rate at which a company creates shareholder wealth. The average ROE for large U.S. companies is 12%, and many investors use it as a threshold for attractive investments.
Companies can boost ROE by increasing leverage, which reduces the safety of the investment. Therefore, it is useful to look at the return on assets (ROA), which measures a company's earning power regardless of its capital structure. A widening gap between ROE and ROA may be a warning sign that should be thoroughly investigated.
Earnings per share is a popular metric used to value a company (using P/E ratio); growth in EPS is often used to judge company growth potential. However, many investors believe that EPS is an inferior metric to ROE, because it ignores the amount of capital the company used to generate earnings.
Free cash flow shows how much cash a company generates from operations, above and beyond what is required to maintain or expand its productive assets. This cash can be returned to investors, or spent by management on growing the company or paying back its debts.
Balance sheets of many companies contain intangible assets such as goodwill, trademarks, patents, etc. Many investors consider intangibles more difficult to value than physical assets. If intangible assets had been valued incorrectly, they must be impaired, resulting in a loss charged against shareholder equity. This chart demonstrates the potential loss to shareholder equity from such impairments.
Companies often use debt financing to increase their return on equity. However, as the amount of debt financing increases relative to the amount of equity financing, the company becomes more sensitive to down turns and other negative events. As a result, many investors use the ratio of debt to equity as a measure of a company's financial risk, and avoid companies that have this ratio above 1.
This chart shows shareholder equity as a percentage of total assets, allowing investors to judge the overall leverage. Companies with a higher proportion of equity can be viewed as safer investments. This metric is particularly important for highly leveraged institutions, such as banks, where it must be at least 4% according to government regulations.
The ratio of current assets to current liabilities is known as the current ratio. This metric is a quick measure of the company's ability to pay its short-term obligations. A current ratio below 1 is a warning sign that should be investigated, especially for companies that cannot count on adequate cash flow from operations.
This chart shows the cumulative dilution of investor ownership in a company over time. Dilution reduces an investor's participation in the future earnings. Dilution increases when a company issues new shares, and decreases when a company buys its shares back. Many investors avoid companies with large chronic dilution.
analysis provides insight into factors affecting the Return On Equity of a company.
The DuPont equation decomposes ROE as follows:
ROE = (Net margin) * (Asset turnover) * (Asset to equity ratio)
Net margin indicates operating efficiency, Asset turnover measures the total asset use efficiency, and the Asset to equity ratio is a measure of financial leverage.
The dividend payout ratio tells investors what percentage of earnings a company returns to shareholders, and what percentage it retains and reinvests. This ratio represents a major capital allocation decision by the company, and can be used to judge management rationality. Rational management should pay out all earnings that cannot be productively reinvested. Therefore, a low dividend payout ratio for a profitable company with a low growth potential may be a warning sign.
Many investors use the P/B ratio as a quick way of judging company valuation. Value investors - followers of Graham and Dodd - specifically seek out companies with low P/B ratios. However, investors should be careful not to make investment decisions on this metric alone, without considering a company's earning and growth potential, since a low P/B ratio can be a sign of a bleak future for the business.
P/E ratio is a popular way of making a quick judgment of a company valuation. Value investors - followers of Graham and Dodd - often seek solid companies with low P/E ratios as investment opportunities. However, P/E ratio represents an oversimplified approach to business valuation, and can often lead to incorrect investment decisions.
In May, 1997, the Company issued 815,000 shares of common stock ($313,725 of Deferred Compensation) and 35,200 non-employee stock options exercisable to purchase 35,200 shares of the Company's common stock at $.71875 per share for employment and consulting agreements and director fees.
On December 2, 1999, the Company acquired the WEB Business of Medical Marketing Group, Inc. ("MMGI") including its Internet website "DoctorNY.com" as well as certain website-based agreements and arrangements with MMGI's physician clients in the New York metropolitan area for an aggregate 140,000 shares of Bio-Reference's authorized but unissued common stock. MMGI also agreed during the period that its Advertising Consulting Agreement with the Company (hereinafter described) is in effect, to market Internet -oriented services to healthcare and healthcare related businesses for linking to and participation in the WEB Business conducted by the Company. The Company has agreed to pay a commission to MMGI equal to 15% of the recurring Internet access and website fees received by the Company from additional customers produced by MMGI through its sales efforts but solely with respect to those customers produced after production of the 1,000th additional customer.
On December 14, 1999, the Company acquired the Health Food Business of Right Body Foods, inc., a manufacturer of starch free, low carbohydrate, low caloric food products distributed in Long Island, New York, through health professionals, dieticians, nutritionists and physicians. The acquisition was effected through a newly formed, wholly-owned Company subsidiary. The Health Food Business was acquired for an aggregate 180,000 shares of Bio-Reference's authorized but unissued common stock. The Company intends to attempt to expand the market for the Health Food Business products through its current physician accounts utilizing its existing sales force and distribution network.
On May 14, 2001, the Company completed the sale of 1,500,000 shares of its common stock for an aggregate $1,500,000. For accounting purposes, the shares were treated as issued and outstanding as of April 11, 2001, the date such issuance was approved by the Company's Board of Directors. The shares were sold to Castletop Investments, L.P., a Texas limited partnership whose General Partner is Topfer Holdings I, Inc. a Texas corporation ("Holdings"). Mort L. Topfer is the president and the managing director of Holdings. Mr. Topfer has agreed to serve as a member of the Company's board of directors.
OPKO HEALTH, INC. (NYSE:OPK) and Bio-Reference Laboratories, Inc. (NASDAQ:BRLI) today announced that the companies have signed a definitive merger agreement under which OPKO will acquire Bio-Reference Laboratories. The transaction is valued at approximately $1.47 billion, or $52.58 per share of BRLI common stock.