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Patrick McKeough is one of Canada’s top safe-money advisors. The Wall Street Journal, Forbes and The Hulbert Financial Digest have all recognized his ability to find stocks with hidden value. He is editor and publisher of The Successful Investor, Stock Pickers Digest, Wall Street Stock Forecaster and Canadian Wealth Advisor; inventor of the Quick Profit/Value System and the ValuVesting System™. A best-selling Canadian author, he wrote Riding the Bull, the book that predicted the 1990s stock-market boom.

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

September 27, 2011 -  Be the first to comment
Posted by: Jim Bates Filed in: Investment Counsellor
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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.

(Note: If you are a current Successful Investor subscriber, please click here to view Pat’s recommendation. Be sure to log in first.)

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