Invest In A Boomer Industry – Your Eyes

Just as we examine companies each week that may be rising past their fair values, we can also find companies trading at what may be bargain prices. While many investors would rather have nothing to do with stocks wallowing at 52-week lows, I think it makes a lot of sense to determine whether the market has overreacted to a company’s bad news, just as we often do when the market reacts to good news.

Here’s a look at three fallen angels trading near their 52-week lows that could be worth buying.

The big knock against STAAR Surgical is the company’s lack of profitability. While a number of eye drug and product peers are delivering profits to investors, STAAR Surgical shareholders have watched their company fall short of estimates in five straight quarters and nine of the past 10! That’s certainly enough of a reason to scare off skittish investors.

In addition, STAAR is reeling from a warning letter issued by the Food and Drug Administration early last month with regard to production at its Monrovia facility. Concerns that the company is currently addressing include the shelf life of its Visian implantable collamer lens (ICL) product and design control documentation.

Yet I suspect that STAAR is about ready to turn the corner. I also believe that the reason the company continues to fall short of Wall Street’s expectations has nothing to do with poor company performance, but rather with a lack of adequate analyst coverage. It’s difficult to call a company’s profit or loss a “miss’ when the estimate only includes one analyst.

Perhaps the greatest factor working in STAAR’s favor is an aging global population. As an alternative to LASIK corrective surgery, STAAR’s ICL offers patients an equally quick sight solution. In the second quarter STAAR announced that its Visian ICL revenue grew 8% globally, with prices rising 3% and procedure volume increasing by 5%. The U.S. is likely to be a large target audience over the coming two decades thanks to a retiring baby boomer population, but growing middle-class wealth in emerging-market countries, coupled with improving life expectancies, means STAAR’s ICLs could play a crucial role in improving the eyesight of millions of people. In Europe, the Middle East, and Africa, for example, sales of its ICLs jumped 22%, demonstrating just how important emerging markets will prove to be for STAAR in addition to strongholds in the U.S.

More importantly, STAAR should be ready to turn the corner to substantial profitability in 2015. Its forward P/E of more than 25 might look unreasonable, but an expected growth rate ranging between 10% and 15% over the coming years should quickly wash away fears of overvaluation. If STAAR can hit its long-term growth targets and push into emerging markets without losing its pricing power, there’s no reason to believe its share price can’t head higher over the long run.

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Category: Articles, Passions Over 55, Senior Health