CMP share price has been hitting year-high in the past few days. I think it would give the management team a lot more motivation and incentive to grow its business.
While I do not know what will happen with spin-off or strategic partnership of DWL, neuro and doppler units, CMP has a strong economic moat from extensive R&D spending over years.
If you look at Price-To-Innovation-Adjusted Earnings, http://www.investopedia.com/terms/p/pricetoinnovation.asp,
its innovation adjusted P/E would be about 9. In other words, although CMP has a net profit of 2.1 millions, it has already spent 4.7 millions in R&D. If you look at amazon business model, it net profit is really small, because it spent heaps in R&D and new product/service development, which has allowed Amazon to consolidate competitive advantage to allow it to remain the industry leader in e-commerce in the US. Its share price continue to hit record-high.
I do like CMP focus on R&D spending, because a lot of companies are obsessed with short-term financial figures, leading to lack of spending in R&D and erosion of competitive advantage, which eventually causes them to go out of business.
I am looking forward to Annual Meeting on 29th. Oct, CMP's R&D will continue to pay off.
It's not like drug company, where R&D would go into bin, if clinical trials failed. Medical devices are relatively less risky.
R&D =>New product => New clients => New contracts => New revenue => Repeat
CMP Price at posting:
35.0¢ Sentiment: None Disclosure: Held
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