Stock investing advice: Re-opened Chalk River reactor propels Nordion’s isotope sales

Nordion Inc., Toronto symbol NDN, sells isotopes for cancer detection and research. It also makes products that sterilize food and surgical tools.

In its fiscal 2011 third quarter, ended July 31, 2011, Nordion’s revenue rose 39.5%, to $66.8 million from $47.9 million a year earlier (all amounts in U.S. dollars). Isotope sales jumped 79.9%, mainly because the Chalk River nuclear reactor near Ottawa restarted in August 2010 after a 15-month shutdown; this reactor supplies most of Nordion’s isotopes.

The company’s sterilization equipment continues to sell well. Nordion is also seeing strong demand for TheraSphere, a process it developed that treats liver cancer using millions of small glass beads that contain radioactive materials. Regulators in Canada, Europe, the Middle East and parts of Asia have already approved TheraSphere. This treatment will soon begin Phase III clinical trials in the U.S.

Thanks to the higher sales, Nordion earned $6.9 million, or $0.07 a share, in the quarter. That’s a big improvement over the year-earlier loss of $16.6 million, or $0.13 a share.

Stock investing advice: Reliance on Chalk River adds risk

The company bought back $40.5 million of its shares during the quarter. Nordion has now repurchased 63% of the shares under its current buyback authorization, which expires on January 25, 2012. Even after these purchases, Nordion holds cash of $69.0 million. Its long-term debt of $43.1 million is a low 8% of its $564.8-million (Canadian) market cap.

The stock has been trading at a reasonable valuation based on its expected earnings in fiscal 2011. However, its reliance on the aging Chalk River reactor adds risk. The $0.40 U.S. dividend yields 4.6%.

We gave our stock investing advice on Nordion in The Successful Investor Hotline for September 16, 2011, which you can view immediately when you take a 1-month free trial to The Successful Investor. Click here to learn how you can start profiting from The Successful Investor right away.

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