Obagi Medical Products, Inc. (NASDAQ:OMPI)

CAPS Rating: 3 out of 5

A pharmaceutical company focused on the aesthetic and skin health markets. The Company develops and commercializes prescription-based, topical skin health systems.


Player Avatar BSHumphreyII (83.96) Submitted: 1/1/2009 6:35:03 PM : Outperform Start Price: $7.46 OMPI Score: +19.13

Obagi has had an earnings dip this year, but it's hard to hold that against them in this economy. Before that, they've had very strong earnings growth and fantastic return on equity and invested capital. The biggest negative is the elasticity of their products compared to those of other pharmaceutical companies. Their largely prescription skin-care products are almost exclusively cosmetic in use. A recession, plus competition from over-the-counter products, could put a serious dent in sales as consumers cut back on spending.On the other hand, for Boomers, getting rid of wrinkles might not seem so "discretionary". Also, their immaculate balance sheet and strong cash flow means that Obagi is in a very strong position to survive any lean times. At around $7 per share, this stock holds great value and will probably pop big with even a moderate earnings recovery. Bullish technicals reinforce this as a buy right now.

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