Market Aligned: Exactech (EXAC)

Exactech is undeniably a small growth company, which brings plenty of opportunity and risk, but also allows it to be agile when responding to industry trends. The company carries a reasonable amount of debt and has good cash flow, but it does not offer a dividend. For such a small company it has impressive international exposure – more than 34% of sales are international. Recently, however, that has hurt the company; its first quarter earnings were a bit below market expectations because of a drop in European and other international sales. The company did not lower its full-year expectations and assumes that both the domestic and international markets will improve with more economic and political clarity. As with many small-cap stocks, Exactech’s stock price is volatile. It had an impressive growth trajectory, including a stock split, with enormous gains in early 2008. Since then the stock has bounced around but in mid-April came down from some post-financial crisis highs. With continued growth prospects, this dip in price brings the stock back into buying range for more growth- (and risk-) oriented accounts.

Corporate Responsibility

Exactech proudly claims that it focuses on improving people’s quality of life both for its customers and its employees. The company gives workers substantial latitude and decision-making ability; it also provides impressive benefits and flexibility, all of which helps employee satisfaction and stimulate innovative product design. Exactech’s own stated values (integrity, compassion, teamwork, excellence and innovation) are truly part of its corporate skeleton and employees are encouraged to write their own values story when they are hired. Unfortunately, Exactech’s story has not been without a few hiccups. The company came under fire in 2010 for allegedly providing illegal kickbacks and financing to surgeons who used their products. This is not an unusual, if regrettable, practice common in this industry. Exactech settled with the government and other parties.  The company does not provide any environmental data, which is not uncommon for a small company, but it does laud its community service program working with local Florida charities and projects. Exactech’s board of directors includes one woman and one minority, while senior management includes two women.

Exactech (EXAC)

Revenues:            $225 Million
2014E                      $1.26
2013E                      $1.07
2012A                     $0.98

Projected Annual Growth Rate: 14%
Dividend: 0%
52 Week High-Low: $21.16 – $15.01
Risk: High