A Rare Micro Cap Stock Investment Opportunity in Healthcare

Risk management is a commonly under-rated dimension of investing in micro-cap stocks. The race to make quick gains should not put accumulated wealth at risk. The few dollars or even cents that a stock is worth can be deceptive. Investors in micro caps should not ignore the additive effects of a series of risky purchases of individually cheap stocks. Fortunately, it does not take rocket science to discover micro stocks that can be trusted to build value of stock portfolios steadily over time. eResearch Technology (ERT on NASDAQ) is a case in point.

ERT has been in business for over three decades. It started by recording essential information on the functioning of hearts of patients. ERT has kept pace with related technology over the years. The company branched from cardiac functions to those of the lungs, a vital part of experiments with new drugs. Not all of ERT’s technology is homegrown from its base in Philadelphia. The management has made judicious investments in establishing an operation in Germany and in information technology related to clinical trials. ERT has blossomed in to a vital cog in the process of expeditious and affordable new drug development.

ERT’s top-line has grown about five times in the last decade. A recently augmented management team has given guidance for about 30% annual growth during 2011. Net profitability and Return on Equity have both been at around 7% during 2010. Investors will be pleased to know that ERT has held its Debt: Equity at just 0.14 in 2010. This has improved further to 0.12 at the end of June 2011. These are impressive achievements for a player in an industry in which large clients from the pharmaceutical and biotechnology industries drive the Accounts Receivables of service providers ever upwards.

The future for a company such as ERT appears to be a beacon in a sea of stock market blight. The need for new medicines will never disappear. Regulatory standards get more stringent by the year. New start-ups keep appearing on the horizon and the successful ones are always favorites for acquisitions by major and established players. All organizations involved in new drug discovery and development need the kind of services that ERT provides. ERT has very limited competition and outperforms its rivals by miles in financial and technological terms. ERT has won a valuable contract from a major and new pharmaceutical industry client during the course of the current year.

ERT stock has traded between $7.40 and $5.30 during the twelve months ended mid-September 2011. This makes it a sound investment option at this time. The pharmaceutical and biotechnology industries, which had decelerated new drug development budgets some months ago are now ramping up their efforts to bring new medicines to the prescription pads of physicians. It is significant that ERT’s services related to Clinical trials have global applications. ERT can help pharmaceutical corporations from the first world organize and analyze patient data from emerging and poor countries that are distant from central R&D facilities. There is near consensus amongst the community of stock market Gurus that ERT is one of the best micro caps for immediate investment.