Zevex - An Undiscovered Stock

Zevex (ZVXI), this stock is up about 14% today. Here is the article published by Greg Kratz of Deseret Morning News, dated Sunday, January 8, 2006. Here is the exact article in verbatim:

Growing fast, improving lives
From humble beginnings, Zevex becomes Utah's top stock
By Greg Kratz
Deseret Morning News

When they helped found Zevex International Inc. in 1986, David McNally and Phill McStotts knew they would be handling a lot of plastic.
And not just to make the company's medical devices. "We used to make fun of being financed by the bank of Visa, MasterCard and American Express," said McStotts, the company's chief financial officer. "We would get credit cards and cash-advance them to start operations."
Twenty years later, Zevex (pronounced ZEE-veks) is not a household name, even in its headquarters city of Murray. But that may be about to change.
The manufacturer of enteral feeding pumps and medical device components saw its stock price skyrocket on Nasdaq from $4.30 per share at the close of trading on Dec. 31, 2004, to $12.10 per share at the close on Dec. 30, 2005 — making it the top-performing Utah stock last year.
"Our stock price increased 181 percent from the beginning to the end of the year," said McNally, Zevex president and chief executive officer. "We're excited about that. It's certainly wonderful that the market has recognized the value that we're building here, and I think that's the most significant aspect of that stock-price increase. The market has realized how undervalued we have been."
In other words, their credit cards are paid off now. But the company is hardly an overnight success.
According to the Zevex Web site, when friends McNally, McStotts and Dean Constantine (who left in 2000) founded the company, they wanted to apply their knowledge in engineering, marketing and finance to improve and save lives by making innovative medical products.
"In the early years, the challenge was to generate enough revenue and profit to survive and grow," McNally said. "Following that, we have experienced 19 years of staged growth."
Zevex grew rapidly in the early 1990s, both internally and through acquisitions, McNally said. During the last five years, the company has focused on honing its business model and building a strong executive team to sustain growth going forward.
"The objective is to bring together a team that can manage a much larger enterprise than we have been in the past," he said.
And they will need that expertise. McStotts said Zevex has about 180 employees, with most working at its 50,000-square-foot building in Murray. But the company expects its work force to expand over the next year, based on increased revenues and production.
Zevex has not released financial figures for the fourth quarter of 2005, but McStotts said its revenue grew 52 percent in the third quarter of last year when compared to the same period of 2004. And its third-quarter net income was $785,483, compared to a net loss of $294,721 in the same quarter of 2004.
"We are particularly excited about our performance in 2005," McNally said. "Our performance through the third quarter of 2005 has demonstrated that we have a business model that can be profitable and can generate double-digit growth, and that the management team and board of directors we have brought together have a plan that can deliver shareholder value."
That plan focuses on Zevex's two primary businesses: therapeutics and applied technology.
The therapeutics division makes and sells enteral feeding pumps. Enteral nutrition, or tube feeding directly into the gastrointestinal tract, is needed by patients who cannot maintain their nutrition by normal oral feeding, according to information from Zevex.
People who may need enteral tube feeding include post-stroke and head and neck trauma victims, and those with cancer, gastrointestinal and esophageal disorders.
"We believe our pumps are superior to all others in the market," McNally said, citing the accuracy, long battery life, size (they fit in a small backpack) and safety features of models like the EnteraLite Infinity.
"(The pumps) let enteral patients enjoy unprecedented mobility."
The applied technology division produces medical device components and systems under private label for other manufacturers. McNally said these Zevex products are used to make surgical tools that improve the safety and effectiveness of everything from cataract surgery, open heart surgery and colon resection to organ transplantation, dialysis and infusion therapies.
"Zevex technology is found within numerous medical devices in critical applications," he said.
And, he said, the company has gained a reputation for product quality and customer service that is paying off both in the United States and around the world.
For example, McNally said, the largest slice of Zevex's international growth recently has been in sales to Amsterdam-based Royal Numico, the company's distribution partner for enteral feeding pumps in 32 countries outside North America.
Other major customers include Alaris Medical Systems, Abbott Laboratories, Baxter, Medtronic and Nestle Nutrition.
In August, Zevex announced a sales and marketing alliance for the EnteraLite Infinity with Option Care Inc., a provider of home care and infusion services in 32 states.
"The Zevex Infinity pump represents leading-edge technology, and Option Care wants to make sure its patients receive the very best care and equipment," said Dan Bramuchi, vice president of sales and operations of Option Care, in a prepared statement at the time.
Such deals are revving the engine for continued growth at Zevex. "The financial growth and success that have come over the past several years we've been on the cusp of, but we have just not been able to cross over," McStotts said. "Now we see the light at the end of the tunnel, and it's a nice, bright light. We have turned the corner. Success is knocking on the door, and we've opened it at the right time."
Now, Zevex is attracting attention from the investment community. McStotts said the volume of phone calls regarding investor relations has increased tenfold in the last two months, and the average daily trading volume of Zevex shares has seen an even larger increase.
"It's been a wild ride. . . . There is a lot of excitement in relationship to the stock. There are believers out there that we're not a one-trick pony and that we can sustain this," he said.
McNally said Zevex is "positioned to be a global market-share leader in several markets." Such prospects make him excited to come to work every day. Even better, he said, he knows his company's products genuinely improve people's lives.
"Our initial vision was for survival, and that vision has grown with each bright individual that we have hired over the history of the company," McNally said. "Our vision now involves having an impact at many different levels, which includes the patient level — making a difference in the lives of patients — at the customer level, within the company, for our employees and all of our stakeholders. . . .
"It's exciting to have been part of the startup and have the opportunity now to turn this company into a business that can sustain itself long-term, into the future."