NORDION INC. $9.66 - Toronto symbol NDN

NORDION INC. $9.66 (Toronto symbol NDN; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 62.0 million; Market cap: $598.9 million; Price-tosales ratio: 2.6; Dividend yield: 4.1%; TSINetwork Rating: Extra Risk; www.nordion.com) sells isotopes for cancer detection and research to hospitals, medical labs and clinics. It also makes products that sterilize food and surgical tools.

In Nordion’s fiscal 2012 second quarter, which ended April 30, 2012, its earnings fell 35.1%, to $4.8 million from $7.4 million a year earlier (all amounts except share price and market cap in U.S. dollars). Earnings per share fell 27.3%, to $0.08 from $0.11, on fewer shares outstanding.

Revenue declined 26.7%, to $50.0 million from $68.3 million. That’s mainly because the Chalk River reactor near Ottawa suffered two unplanned shutdowns during the quarter. (Chalk River supplies most of Nordion’s isotopes.) These shutdowns, which each lasted a week, were in addition to a planned one-month shutdown for maintenance.

Nordion spends about 3% of its revenue on research. This is helping it develop new products that cut its reliance on medical isotopes. For example, it recently started selling TheraSphere, a process that it developed for treating liver cancer using millions of small glass beads that contain radioactive materials. TheraSphere sales, which now account for 25% of Nordion’s overall revenue, rose 10.7% in the quarter.

The stock now trades at a reasonable 15.1 times the $0.64 U.S. a share that Nordion will probably earn in fiscal 2012. The $0.40 U.S. dividend still seems safe, and yields 4.1%.

Nordion is a buy.

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