Meridian develops, manufactures, sells and distributes disease diagnostic test kits, bulk antigens, antibodies, and bioresearch reagents, and performs contract development and manufacture of proteins and other biologicals for use by biopharmaceutical and biotechnology companies engaged in research for new drugs and vaccines.
|Most recent||Growth rate (CAGR)|
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|Book value of equity per share||$4.26||3.4%||2%||2.7%|
|BV including aggregate dividends||15.8%||14.5%||13.3%|
|1 year||5 years||10 years|
|Most recent||Growth rate (CAGR)|
|1 year||5 years||10 years|
|1 year||5 years||10 years|
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 January 1994, the Company acquired a product line from an affiliate of Ortho Diagnostics Systems, Inc., a subsidiary of Johnson & Johnson, comprised of products used primarily for the detection of certain infectious diseases including Chlamydia, Herpes and various viral respiratory infections. The Company also acquired inventory, equipment, certain license rights, a trademark, customer lists, a noncompetition agreement and technical information for the manufacture of the products. The purchase included $3,300,000 in cash paid to ODSI and $82,000 of expenses. As additional consideration, Meridian will pay ODSI up to 6% of product sales made during the nine-year period beginning in January 1995. The Company has recorded the estimated present value of this additional consideration. In a separate agreement dated March 14, 1994, the Company sold to VAI Diagnostics, Inc. certain tissue culture products and assets acquired in January 1994 from the affiliate of ODSI mentioned above. The $650,000 proceeds consisted of cash of $500,000, which was paid upon execution of the agreement, and $150,000 in an unsecured promissory note due in mid-1997. No gain or loss was recognized on this transaction. Also, in June 1993, the Company acquired a product line from ODSI which consisted of the branded products MONOSPOT and MONOLERT, which are rapid tests for infectious mononucleosis. The acquisition included certain patent and trademark rights, customer lists, inventory, technical information for the manufacture of the products, certain equipment and a noncompetition agreement. The purchase included $3,100,000 in cash paid to ODSI at the acquisition date, inventory purchased at unit prices specified in the agreement which aggregated approximately $233,000 and $122,000 of expenses. As additional consideration, Meridian will pay ODSI 6% of product sales made during the three-year period beginning July 1, 1996. The Company has recorded the estimated present value of this additional consideration (Note 5). The Company also assumed ODSI's royalty obligations (equal to 4.25% of MONOLERT sales) to The Scripps Research Institute. The obligation to pay royalties to Scripps expires in 2009.
The Board of Directors announced on October 10, 1995 that it would call the outstanding balance of its 7 1/4% Convertible Subordinated Debentures due 2001 for redemption on November 30, 1995. Approximately $7,400,000 principal amount of the Debentures was outstanding at the time of the announcement. About $4,100,000 had been converted or tendered for conversion into shares of the Company's common stock. As of November 30, 1995, $113,000 was outstanding. Holders of the Debentures had the option of converting their Debentures into shares of Meridian Diagnostics' common stock prior to the redemption date of November 30, 1995 at a conversion price of $5.97 per share or, upon delivery of the Debentures, receiving cash. The Debentures were redeemable at 105% of their face amount plus accrued interest, or $1,068.08 per each $1,000 principal amount. The conversion price of $5.97 per share was equivalent to a conversion rate of 167.5 shares per each $1,000 principal amount of Debentures.
On November 5, 1998, the Company acquired all of the approximately eight million shares of common stock of Gull Laboratories, Inc. (Gull) for $2.25 per share or approximately $18.0 million, in cash. The purchase price was financed by cash and cash equivalents on hand. Gull is engaged in the development, manufacture and marketing of high-quality diagnostic test kits for the detection of infectious diseases and autoimmune disorders.
On January 31, 2005, Meridian acquired all of the outstanding common shares of OEM Concepts, Inc. for $6,590,000 in cash, including transaction costs. OEM Concepts, headquartered in Toms River, NJ, is a leading producer and distributor of highly specialized biologicals for the diagnostic, pharmaceutical, and research markets. The purchase agreement provides for additional consideration, up to a maximum remaining amount of $2,270,000, contingent upon OEM Concepts' future calendar-year sales and gross profit through December 31, 2008. Earnout consideration, if any, is payable each year, following the period earned. During fiscal 2005, no additional consideration was earned pursuant to this provision. The initial $6,590,000 purchase price and transaction costs were funded with bank debt under Meridian's existing line of credit facility and cash on hand.
During September 2005, Meridian completed an offering of 1,800,000 common shares, raising net proceeds of $29,580,000.
On July 20, 2010, we acquired all of the outstanding common stock of the Bioline group of companies. We paid $23,849[,000] to acquire the Bioline Group from cash and equivalents on hand. Headquartered in London, the Bioline Group is a leading manufacturer and distributor of molecular biology reagents with additional operations in Germany, Australia and the United States. The highly specialized molecular biology reagents it supplies to the life science research, biotech, pharmaceutical and commercial diagnostics markets are the critical components used in PCR testing for DNA, RNA and other genomic testing.
On March 24, 2016, we acquired all of the outstanding common stock of Magellan Biosciences, Inc., and its wholly-owned subsidiary Magellan Diagnostics, Inc., for $67,800K, utilizing the proceeds from a new $60,000K five-year term loan and cash and equivalents on hand. An amount of the acquisition consideration totaling $2,198K remains payable to the sellers, pending the realization of tax benefits for certain net operating loss carryforwards in future tax returns. Headquartered near Boston, Massachusetts, Magellan is a leading manufacturer of FDA-cleared products for the testing of blood to diagnose lead poisoning in children and adults. Magellan is the leading provider of point-of-care lead testing systems in the U.S. As a result of the consideration paid exceeding the preliminary fair value of the net assets acquired, goodwill in the amount of $42,730K was recorded in connection with this acquisition, none of which will be deductible for tax purposes. This goodwill results largely from the addition of Magellans complementary customer base and distribution channels, industry reputation in the U.S. as a leader in lead testing, and management talent and workforce. Our Condensed Consolidated Statements of Operations for the three and six months ended March 31, 2016 include $1,173K of transaction costs related to the Magellan acquisition, which are reflected as Operating Expenses.