investorpoet2 (75.76)

InVentiv Health Sure Looks Cheap

September 25, 2009 – Comments (0) | RELATED TICKERS: VTIV

I'm adding InVentiv Health (VTIV) to CAPS today.

They serve the pharmaceuttical industry. Through acquisition they have added more and more services, and through cross-selling are hoping to be a one-stop shop for many companies looking to outsource some of their business functions.

InVentiv has stopped there flurry of acquisitions for now, and they are focusing on integrating the companies they hold and paying down debt. Total long-term debt was $320MM at the end of the last quarter. Large write-downs at year-end 2008 have obscured InVentiv's earnings, but the company produced $87MM in operating cash flow in 2008, and has produced $57MM in operating cash flow through the first six months of 2009. Yet today they have a market cap of $556MM. Yes, this company is priced at 6.4x 2008 cash flow and 4.9x 2009 annualized cash flow. Debt service should not be an issue.

Even if the company produces no organic growth over the next year, with their level of cash flow (which will show up on the earnings statements soon), bolt on acquisitions should commence soon, leading to higher earnings and greater value for shareholders. I look for Inventiv to trade around 12-15x operating cash flow in 2010, resulting in a share price of $40. Easily a double from here.