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Welcome to Profit Confidential • Wednesday, May 23, 2012

Take a Look at the Eye Care Business

Wednesday, March 1st, 2006
By Mitchell Clark, B.Comm. for Profit Confidential

A favorite investment theme of mine is the eye care business. More and more people are either getting corrective eyewear, or are having laser eye surgery. With a large portion of the population coming into the age of vision correction, I think that some investment exposure to this industry is a good idea.

One company that I really like is actually an Italian company, Luxottica Group S.p.A. (NYSE/LUX). This company operates nearly 5,500 optical retail stores mainly in North America and the Asia-Pacific region, selling premium eye glasses brands. The company’s brands include “Ray-Ban, Vogue, Persol, Arnette” and “REVO” and licensed brands include “Bvlgari, Chanel, Donna Karan, Prada” and “Versace”. Retail distribution is done through the company’s own subsidiaries that include LensCrafters Inc., Sunglass Hut International Inc., and O.P.S.M. Group Limited.

The company’s American Depository Shares (ADS) trade on the NYSE.

In its latest quarter ended December 31, 2005, the company’s revenues grew to 1.12 billion euros, up from 948.3 billion euros in the comparable quarter. Net income grew to 85.6 million euros, or 19 euro cents per ADS, compared to 59.8 million euros, or 13 euro cents per ADS in the fourth quarter of 2004.

For all of 2005, total revenues were 4.37 billion euros, up strongly from revenues of 3.26 billion euros. Net income for the year grew to 342.3 million euros, or 76 euro cents per ADS, compared with 286.9 million euros, or 64 euro cents per ADS.

I just like this company, its products, and its distribution network. If there was ever an attractive play on the eye care business, it is Luxottica Group.

Another company that’s experiencing great success is LCA-Vision Inc. (NASDAQ/LCAV). This stock has been on a tear due to the company’s substantial growth.

LCA-Vision operates 41 laser vision correction centers, including 37 wholly owned “LasikPlus” vision centers located in large metropolitan markets throughout the United States. The company has three joint ventures in Canada and one joint venture in Europe. Specializing in “laser eye” surgery so people don’t have to wear eye glasses, the company has performed well over 300,000 eye surgeries since 1991.

This company’s revenues grew 43% to $46.8 million in the fourth quarter of 2005, up solidly from revenues of $32.7 million in the fourth quarter of 2004. Procedure volume increased 41% to 34,225, helping net income to grow 35% to $6.6 million or $0.30 per share.

For the full year 2005, revenues grew 51% to $192.4 million, with procedure volumes increasing 48% to 142,000. The company currently expects revenue growth of between 30% and 40% in 2006.

The companies are but two examples of successful, innovators in the eye care business. From my perspective, I don’t think it’s an investment theme that an investor can ignore over the coming years.

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Profit Confidential AuthorMitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.

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