Margins are likely to expand in fiscal 2011 (August). Pharmaceutical software sales are poised to keep growing at a 25% rate, and comprise a rising proportion of total sales. Operating costs probably will widen at a lesser rate. And the Words Plus unit itself may start to kick in some profits, following a lengthy dry spell. We estimate income will jump 29%-43% to $.18-$.20 a share on a 21%-26% increase in sales ($13.0-$13.5 million). Acquisition of a complementary software line could yield additional leverage. Cash increased $2.16 million last year to $9.63 million, even after stock buybacks equal to $1.03 million. So the money is available if the opportunity arises.
The long term outlook remains bright. Only a small portion of the potential market has been penetrated to date. Software modeling of new drug candidates remains in an early stage of development. Pharmaceutical manufacturers are gravitating to the technology as a way to prune their R&D pipelines more efficiently so they can shift resources behind drugs with the greatest chance for success. The software delivers day to day cost savings, as well. As medical science moves forward software modeling is likely to continue achieving greater adoption. Growth of 20%-30% appears sustainable well into the decade.
(Click on table to enlarge)