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Bioanalytical Systems Inc (NASDAQ:BASI) Is A Biotech Stock Without The Volatilty

Bioanalytical Systems Inc (NASDAQ:BASI) Is A Biotech Stock Without The Volatilty
Written by
Chris Sandburg
Published on
March 2, 2017
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At its Tuesday peak, Bioanalytical Systems, Inc. (NASDAQ:BASI) traded just shy of $2.5 a share. It closed out the session at around $1.60, and maintains that price mid session on Wednesday. Those close to this stock will know it's had a pretty good 2017 so far. The latest prices, even the discounted close recorded post-highs on Tuesday, represent a more than 105% premium to the 2017 open, and – perhaps more importantly from a longer term perspective – have brought with them a solid run through $1.20-30, a region that has held as strong resistance for the better part of the last twelve months.In other words, from a charting perspective, this company looks as though it's turning around.But what about what's underneath the chart? Can the company continue to run from current levels? Let's take a look.So, as a quick introduction, this one is a healthcare analytics company. Specifically, it's a contract research entity that basically serves as an infrastructure provider to companies that are trying to bring a drug to market. If company A is putting drug XYZ through a phase III trial in bowel cancer, and it needs some software with which to collect the data across multiple trial sites, it goes to Bioanalytical Systems. If the same company wants a sample of its CMO's supply batch testing and certifying, it goes to Bioanalytical Systems. If company B wants to test the toxicity of a pre-IND asset in primates, it goes to Bioanalytical Systems. That's just a sample of what the company offers. The great thing about this, of course, is it removes Bioanalytical Systems from the traditional swings of a biotech entity – it's providing the shovels instead of digging for gold, to use an old phrase.So what has the company done of late to warrant the upside run?It's all about the numbers. Don't think of this one as a biotech company. It's not going to put out catalysts in the form of clinical trial data. It's a traditional business in that the important numbers are top and bottom line growth. And we're seeing exactly this growth.First quarter figures just hit press, which detail the three months to December 31, 2016. For the period, revenue came in at $6,174,000, which was a 26% increase from the $4,895,000 recorded during the in the first quarter of fiscal 2016. A large portion of the increase is accredited to a 30% increase in service revenue (so, this falls into the toxicity testing – and many more types of testing, of course – example above).Operating income for the first quarter of fiscal 2017 amounted to $94,000 compared to an operating loss of $529,000 for the first quarter of fiscal 2016.And here's the big one – net income for the first quarter of fiscal 2017 amounted to $17,000, or $0.00 per diluted share, compared to a net loss of $506,000, or $0.06 per diluted share for the first quarter of fiscal 2016. In other words, in the space of a few quarters, the company has gone from losing half a million dollars a year to posting an – albeit small – positive bottom line.The company has worked hard to cut costs over the last twelve months, and its efforts to this aim is something we've been watching closely. An increased top line doesn’t mean much if you're hemorrhaging cash, and while this might not be a traditional biotech play, it's got all the dilution related risks of one; or at least, that is, it did, before it tightened its hold on cash burn.So, what happens next?Well, we think there's every chance this might be the start of a longer term turnaround. Biotech is strong, healthcare is buoyant, and a company that helps others in the space get to where they want to be (which, at core, is what Bioanalytical Services does) should benefit from macro trends.Cash remains a risk, with around $300K on hand at December 31, 2016, but one that is eased somewhat by the improvement in topline and concurrent tightening of op-costs.We will be updating our subscribers as soon as we know more. For the latest updates on BASI, sign up below!Disclosure: We have no position in BASI and have not been compensated for this article.

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