An Investment With Staying Power for the Next Five Years

I’ve just got to talk about one of my favorite investment themes again. The eye care business remains a solid industry for investment. The fundamentals are sound, the marketplace is stable, and company profits are substantial.

Long-time readers of this column will remember my enthusiasm for LCA-Vision Inc.. (NASDAQ/LCAV). This company provides laser eye surgery for individuals who do not wish to wear traditional eyeglasses. In the first half of this year, the stock more than doubled, appreciating to over $50 per share, up strongly from about $20 per share. Not surprisingly, the company reported substantial financial growth during this period.

Once again, the company has delivered exceptional numbers. For its most recent third quarter, the company generated outstanding revenue growth of 51% to $47.0 million. The company’s procedure volume for the quarter increased some 47% to 34,187 laser eye treatments.

Net income growth was even more impressive. Third quarter 2005 net income increased 121% to $7.9 million, up strongly from net income of $3.6 million in the third quarter of 2004. The company also raised its full-year 2005 outlook, increasing its previous guidance over 12%.

Clearly, this company is experiencing a lot of success right now. Another company I’m fond of is IntraLase Corp. (NASDAQ/ILSE). This company manufactures the actual lasers used in “LASIK” eye surgery. The stock has had a tough go over the last six months because few analysts on Wall Street had confidence in the company’s ability to deliver growth.

Well, those street analysts missed the boat on this one. The company just reported revenues for the third quarter that increased 48% to $22.9 million, compared with $15.5 million in the third quarter of 2004. Net income for the third quarter was $2.4 million, or $0.08 per diluted share, compared with a net loss of $3.1 million, or ($1.37) per diluted share, in the third quarter of 2004.

For all of fiscal 2005, the company expects revenue growth to exceed 58% over fiscal 2004. You can expect Wall Street analysts to start tripping over themselves to talk about this story.

The eye care investment theme remains solid. It’s one of the few investment opportunities with clear staying power over the next five years.