HDI Reports – A tough road

HDI Reports – A tough road

It was hard to find any good news in Home Diagnostics (NASDAQ:HDIX) second quarter results. Revenue for the quarter decreased 1.7% when compared to last year, retail channel sales decreased 6.4%, distribution channel sales decreased 12.5% and the company lowered guidance for the remainder of the year. Not unexpectedly the stock is getting hammered down almost 28% in early trading.

The question is where does the company go from here. The company lacks the size, scale and resources to compete effectively with much larger rivals. Additionally privately held AgaMatrix is gaining traction in the marketplace and poses a serious threat to HDI’s private label business. Finally, the overall market is growing in the low single digits and is unlikely to rebound.

Looking towards the future the one saving grace may be that with the stock so cheap the company becomes an attractive takeover candidate. The problem here is HDI is no longer the low cost producer in the category, a title that now belongs to AgaMatrix.

All in all it’s difficult to find a reason to own this stock even at lower levels.

David Kliff
Diabetic Investor
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