CMED Revue before the Conference Call

Hey everyone,

There have been a lot of interesting posts from many different people on here. As we head into the earnings report on Tuesday I want to bring up a few points to generate further discussion.

First: Valuation
Nawar has covered this topic extensively, as have others. They can certainly feel free to correct and/or comment on these points. However, the more people that add thoughts the better so now that I was able to find the company's fy07 guidance I want to briefly add in my two cents on this.
Here is the link for those that do not have it:
http://phx.corporate-ir.net/phoenix.zhtml?c=192852&p=irol-newsArticle&ID=1016218&highlight=

In terms of earnings the guidance calls for an increase of 25.8%-32.3% yoy. Last years' earnings were $1.40 per share. Thus this guidance, by these calculations would put the fy07 earnings at:
low: 1.40 x 1.258 = 1.76
high: 1.40 x 1.323 = 1.85
(Note even the low estimate is over 14% above the 1.54 est on yahoo and over 6% above the 1.65 estimate on MSN).

Price:
Most conservative: P/E ratios same as P/E ttm now = 23.
Price at M07 would be low: 40.5
high:42.5
Still very conservative: P/E ratios at 25
Price low:44
high:46

Less conservative: P/E ratio of 30
Price low:53
high:55.5

The key to the P/E is the five year growth rate. The only place I have been able to find this is on yahoo finance and they have it at over 44.5%. If this is true than even a P/E of 30 would be egregiously low. However, I have learned that these figures cannot be entirely trusted without at least one source of confirmation. (If someone knows of one for 5 year growth estimates please do tell).

So I would use the 30 P/E ratio or perhaps look at the middle growth rate based on company estimates of this year compared to last: (26 + 32)/2 = 29. A P/E of 29 would yield
Price low: 51
high: 54

All of these figures (exact) are summarized in a table on the following page:
http://spreadsheets.google.com/pub?key=pcct1snXYPGAP70PgX64KBg

So the range from all calculations spans from 40.5 to 55.5 for M07. All of these calculations are meant to be conservative so the real numbers could be much higher. If the company misses its own earnings guidance or if the overall market struggles of course the figures could be lower.

Second:
An attempt to address some very legitimate questions brought up by Monsoon. I didn't see this post until recently.
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_C/threadview?m=tm&bn=3886&tid=28507&mid=28617&tof=3&rt=2&frt=2&off=1

I am not an expert on HIFU nor a physicist. However. I have used the science background I do have and have read numerous medical studies to try to answer some of these questions.

First: being able to distinguish healthy cells from cancer cells. The morphology (shape, structure, etc.) of cancer cells is quite distinct from healthy ones. This is why biopsies can be used to detect such cells. Ultrasound imaging may not be able to detect each cell individually. However, tumors tend to grow in masses that ultrasound can detect quite effectively. Within these masses the healthy cells are usually/often cut off because the cancer cells direct the nutrients to themselves. Thus these "healthy cells" are not all that healthy. Thus, the key to using HIFU is to be able to detect the edges of the tumors: where the the tumor begins and where the clearly, functioning healthy tissue begins. The ultrasound used has been able to do this and HIFU has been effective, but as far as I could discern from the research, only in places where there is a large enough "acoustic window" can HIFU as it currenly stands work (i.e. kidney, liver, prostate, breast, etc...)
http://www.ncbi.nlm.nih.gov/sites/entrez?Db=pubmed&Cmd=ShowDetailView&TermToSearch=8777589&ordinalpos=3&itool=EntrezSystem2.PEntrez.Pubmed.Pubmed_ResultsPanel.Pubmed_RVDocSum

2. Necrosis of tissue. Necrosis is not the same as rotting. Rotting is due to bacterial/other living organism eating of dead tissue. In the middle of the body the immune system fights this off. This should give time for the body to clear even large masses of ablated tissue over time.
The following link offers what has happened to necrosed tissue 5-18 days after hepatocellular HIFU:
http://www.ncbi.nlm.nih.gov/sites/entrez?Db=pubmed&Cmd=ShowDetailView&TermToSearch=11783096&ordinalpos=1&itool=EntrezSystem2.PEntrez.Pubmed.Pubmed_ResultsPanel.Pubmed_RVDocSum

Certain tissues are difficult or impossible to treat with current HIFU. But the new study at Duke shows that further advancements in this still rather new field may quickly improve the technology subtantially.

Also, research is being done on this around the world. Also according the the CMED website over 20,000 patients in China have already been treated and clinical applications have also been done in other places such as Europe. I have to believe that if HIFU did not show the promising results and the low risk that it theoretically can produce that it would not have caught on so strongly thus far...

Third: Technical analysis.
This is an area where I really do not have much expertise. Other than knowing a little bit about MFI, RSI, price channels, etc. I am not that informed on this. I am hoping that others on here can continue to contribute to this. I am a long term investor but that being said short-term trends can provide buying and sometimes selling opportunities. It seems that we are in a bullish wedge right now (correct me if Im wrong) and that the current price channel spans from around 29-32 (again correct if wrong). If anyone wants to provide insight on good buy-in prices/times I would love to hear it.

Best to those on here.
Jon