Before we get into our in-depth breakdown, let us say that strictly by the numbers, AHPI is a rare find among its peers.
AHPI is trading at around the $2.00 level. The book value is pegged at $4.56 per share, about double the last sale price, with a 12-month Yahoo! Finance Target of $9.02. That’s a 400% increase from recent prices.
It would be impossible to imagine the company being worth less than book value, and easy to see it top the 12-month target.
Importantly, management of AHPI have kept the company debt free. In fact, the company is so liquid, its assets are over three times its debts.
Companies with these unique set of qualities in this position don’t come along every day. We are urging readers to carefully consider that out of the 6500 plus healthcare product companies, there may be less than a dozen publicly traded in this category on the Nasdaq exchange.
Allied Healthcare Products (NASDAQ: AHPI) Is A Leading Under-The-Radar Choice
In the markets, just as in life, it’s easy to get caught up with what’s new, glittery and getting all the attention. The problem is that our fascination with the latest or sexiest thing can leave out some truly great opportunities. It can actually blind investors to real, under-the-radar investments that can produce huge returns.
We’ve identified one of these situations in Allied Healthcare Products, Inc., (NASDAQ: AHPI) a near 70-year old company that we think could make a fortune for investors who take advantage of the current status. Consider it a pure numbers play in a pure healthcare stock.
The View from Ten Thousand Feet
Allied Healthcare Products owns well-established and respected brands in healthcare with a long legacy going back decades. It holds significant assets and a very low share price compared to book value. It also has aged senior management who have significant ownership, but who would likely see a takeover move by a major healthcare player as a great way to both increase shareholder value and take the company boldly into the future.
How that could play out is pure speculation, but AHPI looks like low hanging fruit: it’s ready for the taking.
You won’t likely hear much about Allied Healthcare Products. Not many analysts follow the company or are out there singing its praises, even though it has plenty of institutional and mutual fund investors. The company has no big “buzz” and it’s not listed in every reviewer’s Top 10 Healthcare Stocks list. For our readers, that’s a good thing. Since it’s not widely known, you can currently buy the stock at about $2 a share– something that is nearly unheard of for healthcare companies, especially with established products in growth markets.
We’ve broken down why we think the situation is ripe with opportunity.
The Healthcare Market Is Big, Really Big
Allied Healthcare participates in the massive healthcare market. The US segment alone is worth $150 billion, or roughly 12% of US GDP. It grows faster than virtually anything other sector.
Healthcare is typically a highly profitable business that’s not dependent on economic prosperity and many company’s lead products are often protected from competition by long patent life spans. Most healthcare companies carry huge valuations, a big multiple of growth, massive assets and generally perform well in nearly any market climate.
Allied Healthcare Products competes in the sub-category of Respiratory Care, currently estimated at about $20 billion annually.
According to Global Industry Analysts, Inc., the worldwide market for Respiratory Care Equipment and Supplies is forecast to grow about 3% annually reaching $21+ billion by the year 2020. Of course that could easily double because of factors such as an aging population, the effects of global pollution and a society that insists on being more mobile.
Major growth in this category is being driven by the rising occurrence of major respiratory disorders such as COPE and OSA, growing patient awareness, and access to healthcare infrastructure.
Another segment of respiratory products is emergency respiratory and related emergency medical services (EMS) equipment, which reached an estimated $5.9 billion globally in 2013. At a 2.9% compound annual growth rate (CAGR) from 2013 to 2018, this market is expected to rise to $6.8 billion in 2018.
Allied Healthcare Products Serves the Entire Spectrum
Allied Healthcare Products have developed a full respiratory product offering for hospitals, acute care facilities and nursing homes.
Their core products involve supplying all the plumbing and equipment for hospitals to install “in wall” systems that provide critical support including oxygen, carbon dioxide and other gases used everywhere in a healthcare facility from the OR to the patient’s room. They also sell the valves, regulators and other hardware needed to support these systems.
They have spent almost 70 years developing respect for their brand name products sold under the Chemetron, Schuco, Lif-O-Gen, Timeter, Carbolime, Litholyme and Oxequip labels. And while the public company may not be widely recognized, their products are as familiar to healthcare providers as BAND-AID® adhesive bandages.
More recently, AHPI have introduced mobility systems for home use and a division dedicated to emergency and mass catastrophe conditions. The latest is the Lif-O-Gen A300 an emergency portable oxygen kit. These products service new markets where Allied is able to grow its business beyond traditional respiratory markets.
Allied Healthcare Products’ Award Winning Life-O-Gen A300 Portable Respirator Unit
Allied Healthcare Products has strong market presence, a broad range of successful products and a huge customer network established over many years – all the right stuff to look for in a successful healthcare products company.
Global Markets Make the Respiratory Care Business More Valuable
The US represents the largest market helped by the aging of the baby boomer population where each day 10,000 people turn 65 years old. The impact of The Affordable Care Act is also providing access to respiratory care for more of the population.
Market growth in Europe is stable, but slower than other regions given that it is generally a stable population. This could change over time based on the flood of immigrants recently streaming into the EU. A long history of government healthcare provided to the masses indicates an existing high level of market penetration.
The Asia-Pacific region is the fastest growing area driven by the massive population base and the many environmental health issues created by rapid industrialization that has depended on coal and other pollutants.
China is evolving into a massive market for respiratory care products that dwarfs the United States. This is a gold mine for companies like Allied Healthcare Products. The evolution of the market is likely to favor companies like AHPI who offer everything from construction level plumbing to hardware applications.
The importance of emerging infectious diseases such as severe acute respiratory syndrome and avian flu infection are big concerns as well as big opportunities. Entering the Asian market would be an instant game changer for AHPI.
Let’s reinforce this very important fact: by the numbers, AHPI looks like a rare find!
AHPI is trading at around the $2.00 level. The book value is pegged at $4.56 per share, about double the last sale price, with a 12-month Yahoo! Finance Target of $9.02. That’s a 400% increase from recent prices.
It would be impossible to imagine the company being worth less than book value, and easy to see it top the 12-month target.
Importantly, management of AHPI have kept the company debt free. In fact, the company is so liquid, its assets are over three times its debts.
Companies with these unique set of qualities in this position don’t come along every day. We are urging readers to carefully consider that out of the 6500 plus healthcare product companies, there may be less than a dozen publicly traded in this category on the Nasdaq exchange.
FEATURE STOCK: FOR COMPARISON
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The Winners: Too Late For Mass Gains, But Good To Study
These stocks represent some of the biggest winners in the healthcare sector over the last several years. These are large cap stocks, but they are evidence of just how well the industry has performed as a whole and offer insight into the kind of mammoth companies who could look to acquire a well positioned company like Allied Health Care Products.
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Our Recommendation: We Give AHPI Our Strong Buy Rating
It’s easy to be impressed by the latest biotech breakthrough or the potential of a future therapy that saves lives, but let’s face it, many (if not most) of those companies never make it through the complex FDA trials process or ever produce products that reach the market. Check the stats. It’s a fact.
So, while you could be enamored with a promising biotech that just might succeed some 5 to 10 years down the line, you could be solidly positioned with a company that is producing real healthcare products right now; products that are used every day by major medical facilities and care providers across the country. That’s a big difference between AHPI and the group of companies that are banking on future prospects.
Another differentiator is the fact that Allied Healthcare Products have been in business nearly 70 years and have built an installed network with over 3000 hospitals and healthcare facilities. That’s an enormous unseen asset of the company. You can bet the M&A scouts would see it that way.
The Respiratory Market is vast and growing worldwide. AHPI is an expert in developing and providing construction systems, in hospital products and now, in-home and portable emergency solutions.
We look at this strong business legacy and the current price structure and we see opportunity: opportunity for AHPI to grow its business globally; opportunity for a large healthcare concern to step in and leverage these assets, and opportunity for investors to possibly double, triple or even quadruple their initial stake if these scenarios unfold.
The bottom line is that companies who are invested in mainstream healthcare products and services are now and are expected to continue to be very attractive. That goes for the big winners in our summary (above) and for the small companies with assets, products and a strategic path, like Allied Healthcare Products.
Whether the Trump version of the Healthcare Act includes or excludes millions of covered individuals, the respiratory care segment where AHPI operates will continue to flourish. This could easily be the simple healthcare products company to outperform its superstar counterparts in biotech. That is unless people stop breathing or getting sick.
We like those odds.
USA News Group
Editorial Staff
Disclaimer
This newsletter/advertisement is a paid advertisement and is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this report or email is not provided to any individual with a view toward their individual circumstances. USA news Group is a wholly-owned subsidiary of Market IQ Media Group, Inc. (“MIQ”). as of June 6, 2017 MIQ has been compensated a total of twenty-five thousand dollars (CDN) from a third party for Allied Healthcare Products, Inc. (“AHPI”) advertising. This 3rd party may have shares in Allied Healthcare Products, Inc.. and may liquidate their shares which could have a negative effect on the price of the stock. This compensation constitutes a conflict of interest as to our ability to remain objective in our communication regarding the profiled company. Because of this conflict, individuals are strongly encouraged to not use this report as the basis for any investment decision. The owner/operator of Market IQ Media Group currently owns no shares of AHPI.
