mardi 13 septembre 2016

CRH Medical: Deep in the ass

Have you ever had a colonoscopy?

I do.

What a funny moment. The doctor inserts a hose in your ass and pushes that hose in your intestine to see if you have cancer or some other shit. When the hose gets in a curve, the sensation becomes a little less funny. I remember disliking that curvy part. And I remember feeling not too comfortable to see the camera inside my ass/intestine/whatever, showing me what I looked like from the inside. There's some parts of your anatomy that you should never be aware of. For instance, your brain, your intestine and that little path inside your penis.

And you know what? I was only 19 when I got that colonoscopy. I got it because I started shitting blood. Well, that wasn't blood in my crap. It was just super hemorroids.

I know: you never asked for this.

Jason Donville seems to like a lot CRH Medical, a company that's a leader in rectum exploration. I've never understood what was so great with this company. They never earned that much money and their ROE is just average. Plus, that's a small company with a short track record.

Let's take a look at some numbers:

EPS 2013: 0,05$
EPS 2014: 0,03$
EPS 2015: 0,04$

Last results (july 28th): EPS: 0,02$

Actual ROE: 13
ROE last 5 years: 16

The ROE was great in 2011, 2012 and 2013 (between 28 and 39) but before, its was very bad (something like -80) and it's just average since 2014. Jason Donville says that the ROE is about 35 but it's adjusted ROE just like the ROE of Valeant, Concordia, Directcash Payment, Pulse Seismic, etc. I don't use adjusted ROE. If the ROE is negative on Reuters, it's negative. Few things did worse to me than adjusted metrics.

The growth in sales and EPS is great in the very recent past, but I don't see anything that could justify to pay 45-50 times actual earnings. Some may say that, to evaluate a stock, we should look forward and not in the rear view mirror.


Some analysts seem to think that the forward PE of CRH is about 12-15. So, it looks like CRH is able to integrate acquisitions like Couche-Tard maybe? Oh yeah, everybody can do the same as Couche-Tard. 

These people probably believe in Santa Claus, in God, or maybe they're retard enough to believe that 9/11 actually happened or that some men walked on the moon in 1969.

Bunch of fuckers.

Anyway, CRH medical is not for me. 

6 commentaires:

  1. From your previous post, Donville's main error in 2015/16 has been his health care call. He still is OK overall with good calls like CGI and MTY but VRX and CXR killed his (and unfortunately my) 2016 results. CRH is the only stock in his main health care stocks calls that has actually done reasonably well. He always has his adjusted ROE and he said this one does 35%. I am interested to see how it does in the future.

    Unfortunately Donville closed his fund to new investor. While I genuinely believe that he cares more than most others about the small retail investor, appearing on BNN is a sales pitch for those guests so you see whatstock they like, their style, process, etc. So with a closed fund, he is unlikely to show up on BNN often if at all. We may have to rely on his newsletter as long as he keeps them available on his website (Van Berkom just removed them....)

  2. I would like to suggest a health sector alternative for you guys...

    It turns out that there is a very small number of companies that actually distribute drugs/ pharmaceuticals. I think there is 5 big ones in all of Europe, ..and the three giants in USA are McKesson (MCK), AmeriSourceBergen (ABC) and Cardinal Health (CAH). These companies are going for 11-12x next year earnings and have a consistent ROE in the low 20s (usually about 22% ROE).

    I just bought shares of MCK at around $165 minutes ago..(they were going for over $240 in May of last year. With my luck, they continue to drop...but this is a very defensive stock. Old people will not stop taking their pills. This oligopoly should do well in the years ahead.

  3. Adjusted number trick is quite annoying as many financial brokers including my own webbroker use the adjusted numbers for some info and real numbers for some info. Gotta get to Sedar or Edgar to make sure my decision is based on right numbers.

  4. Instead of earnings, look at FCF. A company may depreciate assets on purpose to pay less taxes and have better cash-flows.

    Look at CSU, the shares aren't that expensive (around 21xFCF now), growth of 25-30x and no debt.

    Malone's Liberty's usually have 0 earnings but FCF grow at 15% annually.

    Another example is Boyd Group, P/E at 127 but P/FCF around 20x. A PEG(Price Earnings Growth) of less than 1 if you modify the formule (Price FCF Growth).