raytoei (90.12)

Female Health Company (FHC)

February 27, 2009 – Comments (0) | RELATED TICKERS: FHC , OSUR

Today, I read an investment thesis on Female Health (FHC), this company sells female contraceptive. The bull case presented were:

* The new administration will increase spending for initiatives to fight HIV/AIDS

* Some recent new sales order

* Growing and at 15x Earnings, considered cheap.

However, myy Bear case on FHC are:

* Sounds like a Hot stock, a little like Orasure, self-administered oral test for HIV. But OSUR took forever to get into profitability and always at a risk of being sidelined by other technologies

* There are other investments considered safer and cheaper than this company

* Sales is only 25m and it is selling 3.5x sales, even though P/E is only 15. For small caps, sales growth is a more important measure (in my opinion) and 3.5x isn't cheap.

As someone really smart once wrote, you can't really stop people from speculating, the only thing we can do is to limit the loss on speculation to say 5% of trading assets. Sounds reasonable to me.

My verdict: Too speculative.

raytoei