Zacks Small Cap Research – PBSV Releases Quarterly Results – Technologist

By Brad Sorensen, CFA

OTC:PBSV

READ THE FULL PBSV RESEARCH REPORT

Pharma-Bio Serv (OTC:PBSV) announced results for the quarter ended January 31, 2024. The headline was below expectations and management noted that the company was “challenged” in the quarter. Management didn’t elaborate on what those challenges were, but all geographical segments of the company’s business suffered losses and saw revenues that were substantially lower than the prior year.

However, we believe the company is putting itself in a better position for the future, with management noting that the company is planning investments that will allow PBSV to “achieve future growth and profitability. Additionally, we were heartened to see management’s note that the company is investing in additional business development resources. The previous quarter was certainly disappointing, we believe a quarter like this was needed to move the company forward. We are hearing statements about investing in the future that we haven’t heard for a while, and we believed were necessary to take this company to the next level. Sometimes a company must take a step back in order to move forward in a meaningful way and we believe this is one of those cases.

For investors, however, the company continues to focus on rewarding shareholders. Pharma-Bio Serv recently announced that it is again paying a dividend of $0.075 per share for shareholders of record as of January 30, 2024. This announcement continues a trend for the company of rewarding shareholders with a healthy dividend. The recent dividend announcement gives investors a close to 8% yield through investing in a business that has been steady and shown improvement over the past couple of years, until this recent, temporary, blip. We believe this makes a nice combination and urge investors to look at the under-the-radar stock for a potential addition to a portfolio.

Additionally, the balance sheet continues to look solid. At first glance it appears that the company’s cash balance has decreased from $10.5 million in October 2023 to just under $6.4 million. As we’ve discussed before, the company has done something with that “missing” cash that we believe is much smarter and will benefit the company and shareholders—management has decided to invest around $9.5 million in US Treasury Bills. With recent yields on T-bills between 4-5%, this move allows the company to hold cash equivalents that are actually earning a nice yield, while remaining safe and liquid—a win, win for investors and the company and adding to the revenue for Pharma-Bio Serv. Additionally, the solid liquidity of the company means that management has the internal funds needed to make the investments that will get PBSV back on the growth trajectory investors want to see.

Despite the revenue decline, the company continues to have a solid business model in our view, and we are pleased to see investments being made in expanding that business. These facts continue to lead us to continue to have a positive view on PBSV stock, but the company needs to show progress throughout 2024, and we are confident they will.

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