Meridian's Prognosis Is Good

JILL EVANS
PORTFOLIO MANAGER
ALPINE DYNAMIC DIVIDEND FUND

COMPANY: Meridian Bioscience
TICKER: VIVO (Nasdaq)
PRICE: $24.76 (as of 4 p.m. yesterday)
52-WEEK RANGE: $8.85-$27.74
MARKET CAPITALIZATION: $645.7 million

Jill Evans is a portfolio manager at the Alpine Dynamic Dividend Fund, which has more than $380 million under management. Meridian Bioscience is a bioresearch and development company in Ohio. Ms. Evans spoke to David Dalley of The New York Sun about why the stock could rise 20% over the next 12-18 months.

What does Meridian do?

They primarily manufacture diagnostic tests for infectious diseases.

Why do you like the stock?

We like them because they're a niche player for rapid diagnostic testing, but they also have a life sciences and bio-defense business. The combination is a company with earnings forecast to grow 25% annually over the next few years. It's a small-cap growth company and it has committed to paying out 75% to 80% of its earnings in dividends.

What will drive growth?

Three-quarters of their revenue is from their rapid diagnostic testing business. They have about 200 rapid disposable tests right now, for things like strep throat and influenza, and the FDA just approved one for stomach ulcer bacteria. That is a huge market. The cost associated with people having ulcers is tremendous. Regular testing costs the health care industry about $6 billion a year. The cost of Meridian's test is about $20, it can be done right in the doctor's office, and it's more accurate. The diagnostic business alone is growing revenue at about 10% to 15%.

What do you think the stock's worth?

We see about a 20% upside in the stock, plus the 1.8% dividend yield. We think it could get to $30 over the next 12-18 months. It's a recession-proof story. It has a strong balance sheet: no debt and a lot of cash. We would expect them to make a few acquisitions going forward as well.