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    ROCM Chart – Catching a Falling Knife?

    By Stock Charts | May 2, 2007




    One of the stocks on my watchlists–Rochester Medical (ROCM) recently took a massive nosedive following an earnings report. Now this is by no means a new phenomenon, but I can’t seem to figure out the reason behind the plunge.

    ROCM Stock Chart

    Rochester Medical showed strong promise, and was featured on IBD’s top 100 medical stocks (even reaching the #1 position) as well as IBD’s top 100 ranked stocks. It was also touted highly in a recent Motley Fool article.

    Here’s the AP press release:

    Catheter maker Rochester Medical Corp. said Tuesday it swung to a fiscal 2007 second-quarter profit on a surge in sales.

    The company earned $1 million, or 8 cents per share, compared with a loss of $244,319, or 2 cents per share, during the same period a year prior. Revenue rose to $8.3 million from $4.9 million.

    The revenue increase came from both sales of Rochester Medical brand products and private label sales, the company said.

    Operating costs nearly doubled during the quarter, rising to $3.5 million from $1.8 million. The company said it is spending more on marketing and sales globally.

    Shares of Rochester Medical plunged $1.90, or 8.1 percent, to $21.55 in premarket trading.

    It may be that the stock was overdue for a correction, or perhaps there was poor guidance. Theres definitely an increasing short interest in the stock. But from what I’ve seen it seems that the earnings report was positive and there’s definitely room for future growth. Still, I won’t be getting into this stock anytime soon.

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    Topics: Commentary | 6 Comments »

    6 Responses to “ROCM Chart – Catching a Falling Knife?”

    1. Bullish Jim Says:
      May 3rd, 2007 at 5:05 am

      It was a typical overbought, overextended IBD 100 stock. When they fall they really fall. It’s as if a huge number of shareholders suddenly realize simultaneously that they have their nest eggs tied up in a company that has $8M in quarterly revenue. Look at SYX and IAAC (one year chart) for similar stock charts of IBD 100 stocks gone bad. Once they have their freefall, they’re usually toast as a momentum play. I make this point based on very painful personal experience…

    2. Fred Says:
      May 3rd, 2007 at 7:23 am

      I believe many new buyers were led into this stock over the last few months under the misperception that it was trading at 6-8 x earnings(reality is 50-100 x earnings). Every data source was counting their massive one time settlement into the most recent quarterly earnings and extrapolating it as if it were going to happen every quarter. I think people are just smelling the coffee and waking up to the fact that the company is very richly valued even at $18.00.

    3. Fred Says:
      May 5th, 2007 at 10:13 am

      ROCM will now trade amongst those that feel they truly know the ROCM story. Those that feel they have an edge in determining it’s real valuation. Those that feel it’s undervalued even factoring out lawsuits and those that feel it’s still brutally overvalued on many different measuring sticks, including future market potential. The flushing of anything momentum related has been complete; ROCM has been dismissed from IBD and VectorVest, which had it rated as their top stock going into last week and continually in their top 10 for a few months, now has ROCM rated as a sell. This will be fun.

    4. Walt Calahan Says:
      May 5th, 2007 at 4:32 pm

      The markets are usually right even when a correction happens that no one understands. Of course there have been mistakes made by an investor, but they usually quickly corrected. ROCM has had a sustain drop with a modest retrace after what seemed to be a broad acceptance by everyone. Has the PPS bottomed and is now on its way back up? My intuition say to waite before buying back in. JMHO

    5. Fred Says:
      May 7th, 2007 at 8:14 pm

      And there you go…Vector Vest updates info for ROCM tonight with the new earnings data incorporated into the mxi; their fair value went from $42.00 to $9.62 and their PE ratio for the company went from roughly 6.5 to 52.81. Like I said a few days ago, many were sucked into this stock believing they were putting one over on the big ole dumb market by buying a super fast grower at a super deep discount. It just wasn’t so.

    6. Walt Calahan Says:
      July 20th, 2007 at 9:34 am

      A wounded security take a lot of time to recover and ROCM is no different. It seeme to have found support in the $14/shr area with a report on 7/26 which could help. That said, anything can happen, up or down.

    Comments