Paysign Inc

Paysign Inc (Nasdaq: PAYS) provides debit card payment solutions, customized payment services, transaction processing and prepaid card programs.

Investment Highlights – SPECULATIVE BUY at USD 2.85

• The Covid-19 pandemic has accelerated the trend of digital payments, which shall support the digital financial solutions provided by the Company.
• In FY21, the Company expects to report 20% to 32% growth in revenues and adjusted EBITDA to be in the range of US$0.35 million to US$1.90 million.
• The plasma revenue can reach US$27.5 million in FY21, while the Q2 FY21 results are expected to be better than Q1 FY21.
• From a technical standpoint, 14-day RSI (31.76) is in the oversold territory, while the stock price is hovering below the lower standard deviation of the Bolling Bands.

Key Risks

• The resurgence of Covid-19 cases can have an adverse impact on the Company’s operations.
• The stock has declined over 68% in the past year and shown a significant downtrend.
• The Company has limited financial resources due to lack of profitability, and growth trajectory is dependent on external funding at right time on acceptable terms.

Recent News

Product Launch: On 31 March 2021, Paysign launched the Premier referral program to provide digital banking solutions to payees with no startup costs.

Q1 FY21 Financial Highlights (for three months ended 31 March 2021, as of 12 May 2021)

 (Source: Company Website)

• During Q1 FY21, Paysign reported a decline in top-line and bottom-line items of the income statement due to the distribution of tax refunds which was exacerbated by the pandemic-related disruption.
• The Company added three new plasma centers during the first quarter.
• It maintained zero debt on the balance sheet with US$6.6 million of unrestricted cash.

One Year Share Price Chart

 (Data Source: Analysis done by Kalkine Group)

Valuation Methodology: EV/Sales Approach (FY21) (Illustrative)

Conclusion

Paysign is well-capitalized and placed to navigate through the Covid-19 pandemic given its nil leverage on the balance sheet. The financial outlook of the Company seems promising, consider the recent recovery in trading. Paysign also continued to win new pharmaceutical copay business and targets several new programs launch in FY21 ahead. The business is likely to rebound with the lifting up of business restrictions and accelerated vaccination programs. The stock made a 52-week low and high of USD 10.98 and USD 2.77, respectively. The next important support level on the technical chart is at USD 2.39.

Based on the decent financial guidance, operational achievements, robust balance sheet, lifting of Covid-19 restrictions, and favourable valuation conducted above, we have given a "SPECULATIVE BUY" stance on Paysign Inc at the current market price of USD 2.85 (as of 12 July 2021 at 11:35 AM ET), with lower double-digit upside potential based on 5.98x EV/NTM Sales (approx.) on FY21E Sales (approx.).

Biomerica Inc

Biomerica Inc (NASDAQ: BMRA) provides biomedical technology to develop advanced diagnostic and therapeutic products leveraged for the treatment of various diseases and medical conditions.

Investment Rationale – SPECULATIVE BUY at USD 3.76

• Biomerica reported robust revenue growth in the last quarter and shown progress in enrolling patients for InFoods® IBS endpoint clinical trial. This patent product is targeting to address the US$30 billion Irritable Bowel Syndrome market.
• The Company has no debt and preferred equity, around 24% insider ownership, which is reflecting a conservative capital structure.
• Over the past five years (FY15 to FY20), revenue has grown at a CAGR of nearly 6.17%.
• From a technical standpoint, 14-day RSI (45.64) is close to the oversold territory, while the stock price is hovering below the lower standard deviation of the Bolling Bands.

Risk Assessments

• Ineffectiveness or inability to gain acceptance for the Covid-19 test could materially harm the operations. As new mutations of the virus can impact the test effectiveness and expected commercialization might not be achieved.
• BMRA’s stock price has given a negative return of ~57.96% in the last year, reflecting an underperformance against the NASDAQ Composite index.
• The Company does not intend to pay dividends in the foreseeable future, which can impact the lucrativeness of the stock price.
• The changing regulations for approvals and inability to control margins with exceptionally higher inventory reserves can also impact its ability to be profitable in the near future.

Recent News

Distribution Agreement: On 24 June 2021, Biomerica signed an exclusive five-year distribution agreement with hp+detect™, to sell the products in Canada.

Financial Highlights for the quarter ended 28 February 2021 (Q3 FY21) (as on 27 April 2021)

 (Source: Company Website)

• During Q3 FY21, BMRA reported 208% growth in revenue against Q3 FY21, driven by sales of COVID-19 Antigen Rapid Test post January 2021 in Europe.
• The Company cost of sales surged due to its large inventory reserves. The gross margin without exceptionally higher reserves would have been 38% in Q3 FY21.
• Biomerica also increased R&D expenses and incurred higher general and administrative expenses due to higher reserves and planned commercialization.
• Therefore, the Company reported an aggravated net loss in Q3 FY21 and reduced cash and cash equivalents as on 28 February 2021 as compared to 30 September 2020.

One Year Share Price Chart    

 (Data Source: Research done by Kalkine Group)

Valuation Methodology: EV/Sales Approach (FY21) (Illustrative) 

Conclusion

Biomerica has a robust portfolio of around 83 diagnostic products and approximately 100 international patents filed, and it serves some of the most respected healthcare institutions. The Company expects top-line analysis from the InFoods® IBS endpoint clinical trial by the end of Q3 CY21. Adjacently, the Company’s InFoods® products can revolutionize the treatment of gastrointestinal diseases and generate sizeable revenue opportunities. Moreover, the launch of COVID-19 tests at a low cost shall support further revenue growth. Meanwhile, FDA continued to review their products in the US market. Overall, the Company has considerable opportunities for testing globally. The stock made a 52 week High and Low of USD 12.75 and USD 3.30, respectively. On the technical chart, the next important support level is at USD 3.08.

Based on the significant revenue growth, announcement of the new Covid-19 test, robust product portfolio, and favourable valuation conducted above, we have given a “SPECULATIVE BUY” stance on Biomerica Inc at the current price of USD 3.76 (as on 12 July 2021 at 11:35 AM ET), with lower double-digit upside potential based on 5.98x EV/NTM Sales (approx.) on FY21E Sales (approx.). 

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level (indicative stop-loss price).

*Dividend Yield may vary as per the stock price movement.

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