American Shared Hospital Services Won’t Stay Cheap For Long?

American Shared Hospital Services leases radiosurgery and radiotherapy equipment to cancer centers.

It’s a very predictable, high margin business that will likely see significant growth in the coming years.

At under 10x EV/EBIT, the stock offers a very attractive risk/reward opportunity with 60+% upside potential over the next 12-24 months.

With the market hitting new highs almost weekly, finding cheap stocks is like looking for a shrinking needle in a large haystack. You have to sort through hundreds of stocks just to maybe find a couple worth investing in. One of these increasingly rare finds is a little company called American Shared Hospital Services (AMS).

Business

AMS provides state-of-the-art radiosurgery and radiotherapy equipment to medical centers. It does so by financing the equipment and then entering into 10-year contractual agreements with each medical center. The medical center operates the equipment and pays AMS a fee, either on a fixed per use or revenue sharing basis.

The Gamma Knife, a precise, noninvasive tool that applies radiation beams for tumor treatment, accounts for just over 70% of revenue. Most of the remaining revenue comes from Proton Beam Radiation Therapy, or PBRT for short, which is similar to the Gamma Knife except that it uses proton rather than photon radiation.

The Gamma Knife business is well-established with minimal growth potential. The PBRT business, on the other hand, has only been around since early 2016 and is growing rapidly. AMS currently has one PBRT system in operation. Management plans to launch two more systems within the next couple of years, which have the potential to be significant growth drivers.

Growth

AMS’ revenue has been hovering in the $15 million to $20 million range for over a decade. Despite being very profitable during these years, this lack of growth is likely a big reason why the company’s stock has stayed off of most investors’ radars. However, I expect this to change going forward, and the PBRT system will be the catalyst.

https://seekingalpha.com/article/4208326-american-shared-hospital-services-stay-cheap-long-shares-offer-60-plus-percent-upside