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SMED - Sharps Compliance Corp.

We look at speculative stocks that were favorably recommended by the majority of analysts as stocks to buy. We conduct a basicfundamental analysis so that finance students and investors can see for themselves whether these analysts' recommendations would make a suitable speculative investment.

Sharps Compliance Corp. NASDAQ:SMED is a micro-cap company in the waste and disposal services industry and its stock is thinly traded at around $0.1 million per day. The company has a history of growth with its revenue, book value and the number of employees increasing over the last five years. The company struggles with making a consistent profit.

The key fundamentals for SMED are shown below.

Fundamental Data: SMED

YearRevenue $MillionEPS $/share ROEBook Value $/shareEmployees
2014-0626.60.06 4%1.4061
2015-0630.90.08 5%1.5074
2016-0633.40.00 0%1.5099
2017-0638.2-0.08 --1.60120
2018-0640.1-0.04 --1.60140

The fundamental data above shows that the company's revenue has shown a strong increase. The book value has increased and the number of employees has shown significant increases. The company has made a profit in two of the last five years.

Fundamental Analysis for SMED:

In the years when SMED makes a profit the return on equity is quite low at around 5%. Similarly the profit margin (profit to revenue ratio) is low at 3% when the company makes a profit.

The working capital ratio (current assets to current liabilities) is around 2.6 which indicates that SMED has sufficient working capital.

The debt ratio (long-term debt to tangible assets) is around 0.4 which means that the value of SMEDs tangible assets covers its long-term debt (tangible assets are hard physical assets that can be sold in the event of bankruptcy liquidation).

The total ratio (total liabilities to total assets) is around 25% which means that SMEDs total debt is 25% of the value of everything the company owns.

For the 2019-06 year the analysts consensus earnings is $0.05 per share with $43 million in revenue.

For the 2020-06 year the analysts consensus earnings is $0.09 per share with $45 million in revenue.

The 2018 PE ratio is around 40 (based on analysts consensus forecast earnings).

The book value is around $1.60 and SMED is trading above its book value.

The bankruptcy risk can be calculated using the Z-score. SMEDs Z-score is 5.0 which means the company is a low bankruptcy risk stock.

Summary

The company does have growth potential with the analysts forecasts showing SMEDs making a profit in 2018-06 with earnings of $0.05 with another increase in earnings of $0.09 for 2019-06. The revenue is forecast to increase in 2018-06 with again in 2019-06. SMED is conservatively financed and is a low bankruptcy risk based on its Z-score.

SMEDs maximum price history chart is shown below.

Chart 1. Price history for SMED

weekly Chart SMED

The maximum price history chart for SMED shows how the stock has performed since 1997.

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