Thursday, October 14, 2010

Zoll Medical Corporation: Strong Growth in a Growing Medical Equipment Market

As per their website Zoll Medical is a leader in medical products and software solutions, helps responders manage, treat, and save lives in emergency rescues and in hospitals; outside the hospital while at work or home; in doctors' and dentists' offices and schools; in public places and on the battlefield. ZOLL's products contribute to managing patient care and savings lives, as well as increasing the efficiency of emergency medical, fire and hospital operations around the globe.

When we look at the recent growth in EPS and sales for Zoll Medical (ZOLL) we can see that their products are clearly in demand. During the past two quarters YOY EPS growth has been 113% (.17 compared to .08) and 271% (.26 compared to .07). Sales growth during the past four quarters YOY have increased 2%, 18%, 15%, and 17%. Even better, 2010 and 2011 EPS estimates are for gains of 89% and 38% respectively.

The company also carries 0% in debt, has a Return on Equity of 3%, an EPS growth rate of 32%, and a cash flow of $1.34. Zoll Medical definitely has strong growth and sound financials.

Stocks do better when they have other stocks in their industry group performing well on a RS basis. Nxstage Medical (NXTM), Dexcom (DXCM), BSD Medical (BSDM), Tearlab (TEAR), Synergetics USA (SURG), CAS Medical (CASM), Hill-Rom Holdings (HRC), and Cephid (CPHD) are just some of the stocks in the Medical-Systems/Equipment industry group that carry RS ratings of 80 or higher. So this is just one more item in favor of Zoll Medical moving higher.

Recently mutual fund ownership has started to increase again from 94 funds in the most recently reported quarter from 90 the quarter before. However, four quarters ago the stock did have 102 funds invested in it. That is OK, since we do have growth in the most recent quarter.

While these numbers are impressive for Zoll Medical, the most important aspect is the chart. Is the stock in an uptrend and under accumulation? Yes. Since that is the case we need to find a good low risk high reward entry. On that end the move on Thursday is definitely what I was looking for.

The stock bounced off recent support on strong volume with the stock breaking above the short-term downtrend line. The stock also closed very near the HOD indicating the buying should spill over to Friday morning. The purchase price for me is the 33.41 close on Thursday.

This is a great stock with strong fundamental growth and a bullish chart under accumulation. With the market being in a current uptrend thus putting the odds of purchasing this stock well in our favor, Zoll Medical will be a new purchase for me on Friday.

If the stock does not move higher immediately, I will be cutting my losses—protecting my hard earned capital—with a close below the LOD of Thursday (32.25).

Disclosure: Long Zoll Medical (ZOLL)

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