Obagi Medical Products, Inc. (OMPI)

Caps 5, StockScouter 10

going with motley fool 5star on this one...schwab rates "c"

After a check-up from your skin Dr. he/she states you would benefit from this product only avail. in my office. What would you say? Most will buy and try to then return to the same Dr. who compliments your new found youth! Solid balance sheet with exllnt. history to boot up for this econ. downturn. People are vain....stock-up.

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.

Solid earner due for a big bounce.

Fool Article (3 More Outrageously Cheap Stocks - 10/7/08)

No Debt! Key to growth in a company and undervalued. Will double in the next year after recent drop!

OMPI

Business
Obagi Medical Products, Inc. is a specialty pharmaceutical company focused on the aesthetic and therapeutic skin health markets. The Company develops and commercializes prescription-based, topical skin health systems that enable physicians to treat a range of skin conditions, including pre-mature aging, photo-damage, hyperpigmentation (irregular or patchy discoloration of the skin), acne and soft tissue deficits, such as fine lines and wrinkles.

Financials
-15-25% top line growth with no end in site
- High profit margins
- Negligible debt
- PE:13
- PB:4

What it's missing:
- Tenured management
- Product diversity (70% of revenue comes from one line)
- An established moat
- FDA assured safe products (FDA cannot assure users that hydroquinone is not a carcinogen)
- An extreme undervaluation

With a EV to FCF ratio of about 10, it is hard not to like a stock that has been growing by 20%+ per year. If we are entering a recession, then med-biotech is a good place to be, and dermatology for the old and rich will not go away.

What the heck? I need points!

Strong fundamentals are currently undervalued.

I like it's balance sheet so I'll go with it!

Blah blah blah. You can talk about numbers, and you may be right/wrong about the price

***Bottom line***
My mom uses their stuff like it's crack. Her friends use their products like they're on crack. Every week that goes by, they get more and more of their friends to use the products.

Benefit overweighs the risk. I do not think FDA investigation will start until next year if there is any at all.

This company used to be in the 20s. It missed earnings a couple times and was oversold like you wouldn't believe (down to 7 dollars). Based on the future prospects of the company and the great valuation, I picked up some shares in real life at 7 dollars. I still think it is undervalued at 9...but it carries some risk.

I like their product strategy (prescription strength skin care). I figure with the conditions for skin in the world only getting worse and the superficiality of people only increasing over time, their products will be in high demand. They are launching a new product in the 4th Q.

Mgmt is strong and charting below S&P

NO DEPT "Dept free way to be."

Just bought some, so I thought I should list it here. I believe this is a very attactive price point for a company that should recover well when the economy improves.

Numerous drivers in the near future and market over reaction to an FDA indication means profit is in site.