Seeking Alpha: Medical Action Coming Along

When I last wrote on Medical Action Industries (MDCI) in April, I thought the shares looked like an interesting idea given management's intention to pare away less profitable products and really focus on improving margins. Since then the shares are up more than 40% and the company has followed through on their stated plan of self-improvement. Between ongoing margin improvement and a debt refinancing that created valuable breathing room, I believe these shares are worth more now and still have around 20% upside.

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Medical Action Coming Along

Seeking Alpha: Most Of The Action At Medical Action Will Come From Margins

When most med-tech companies trade at an EV-to-sales multiple of 2x to 4x, Medical Action Industries' (MDCI) 0.4x multiple is a pretty clear signal that something is very different about the company. In this case, we're talking about a small medical disposables company that has not only been seriously growth-challenged, but also had to absorb significant gross margin pressures. Although patient value-oriented investors may want to consider Medical Action Industries for its margin improvement potential, investors should keep in mind that the market seldom give full credit to companies with weak internal growth prospects.

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Most Of The Action At Medical Action Will Come From Margins