Biological Testing Bargain

Luminex sells systems that drug researchers need to come up with new discoveries. Business is good.

In this kind of market, a best stock that is only down 30% from its 52-week high is something of a star performer, since the major averages are all down 40% to 50% from their highs.

Believe it or not, biotechnology stocks are leading the market, even though they are traditionally one of the most speculative and volatile groups. Since the market meltdown began in earnest in late September last year, the Dow, Nasdaq and S&P 500 are each about 30% lower. The AMEX Biotech Index is only down 12%, thanks in large part to a 30% rally since Nov. 20.

One of the best performers in biotechnology over the past few months has been Austin, Texas-based Luminex (nasdaq: LMNX - news - people ). Shares of the company, which specializes in biological testing technologies, are up 40% since Oct. 27, compared to a 20% gain in the Biotech Index. Of course, this gain comes after considerable pain; shares lost half of their value in the month prior to turning higher.

"Though it is currently fading back towards the lower end of its trading range between $18 and $22, as long as it holds above $17.50, Luminex's stock is still tracing out exactly the sort of chart pattern we would like to see at this stage of the overall market cycle," says Nate Pile, editor of the Nate's Notes investment newsletter and a bull on Luminex.

Luminex's xMAP system delivers bioassay results to users in pharmaceutical drug discovery, clinical diagnostics and biomedical research, including genomics and proteomics research.

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"For 2008, Luminex reported revenues of just over $104 million

and net income of just under $3.1 million, or $0.08 per share, as compared to revenues of $75 million and a net loss of $2.7 million, or $0.08 per share, in the prior year," says Pile. "Management also offered guidance that it currently expects revenue to come in between $130 and $140 million for 2009."

Those revenue gains would amount to increases of around 25% to 34% vs. revenue reported in 2008. For the fourth quarter of 2008, revenue came in at $28.2 million, up 31% from the fourth quarter of 2007; and full-year revenue of $104.4 million was up 39% compared to 2007.

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Luminex earned $0.05 per share the fourth quarter of 2008, or $2 million, vs. a net loss of ($0.08) per share, or $2.8 million, for the fourth quarter of 2007, excluding non-recurring items of $13.9 million from the fourth quarter 2007.

"With almost $125 million in the bank and very little debt, LMNX is considered a strong buy under $20 and a buy under $24," says Pile.