Utah Medical Products (UTMD) is a great small cap medical products company from Salt Lake City. Primarily they make disposable or reusable products for neonatal, obstetrics, fetal monitoring etc.
Here are three plots of interest for this company.
The top is the "owner earnings" (Buffett's term for per share free-cash-flow) over ten years. Note the nice growth rate of 16-17%. Note also the two-stage growth slowing from 24% to 9.6% in the two five year intervals. Back to that in a moment.
The second plot is return on equity (ROE). It flucuates between 20 and 40 which is excellent. They say they aim for at least 25.
The third plot is most interesting. This is shares outstanding. They buy back shares like crazy. They are reducing share count by 8.6% per year over ten years. In addition, they just started paying a dividend which is growing rapidly. The thing with this company is that they do not really grow much. They are simply very profitable and they use nearly all their earnings to buy back shares which raises EPS. This keeps them a microcap, only $132M. They are a great little cash machine that Wall Street ignores simple because they are too small for big mutual funds to buy.
This company was nearly shut down two years ago by the FDA due to some false accusation about safety violations that was thrown out by a judge. The stock crashed. They lost customers. They spent a ton in legal fees that they are now trying to recover from the FDA. That is now done. This hurt them financially. You can see this in their growth rate above (first plot). The second five year period is much slower growth 9.7 versus 24. With all of this behind them, they should be able to growth EPS at that higher rate of 24%. After all, why not? They are not really any bigger than 10 years ago. Most companie's earnings slow because they get bigger. This company stays the same size and buys back shares and will probably raise its dividend and hopefully make some smart aquisitions. Why shouldn't they be able to regain that level of profitability?
If they do this stock will have a great run. Even if they don't improve much they are fairly priced at P/E=17. This would be a great compnay for JNJ to buy. I have bough some shares and will probably buy more soon. Keep an eye on the insider transactions.