Oculus Innovative Sciences’ OCLS Penny Stock is Stupid Cheap

While gamblers on the OTC Bulletin Board anticipate the inevitable dump of Great Wall Builders Ltd. (OTC: GWBU) penny stock which is up 24.68% at a new high of $1.92 at midday, smart gamblers are waiting for the earnings to come out for one of the undervalued Nasdaq penny stocks. Oculus Innovative Sciences, Inc. (Nasdaq: OCLS) is set to announce financial results for the quarter ended March 31, 2012, after the market closes today. OCLS stock is clearly being standoffish with just 2,100 shares traded today, about 3% of the 3 month average volume.

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OCLS Stock Chart

Market Cap (intraday): 21.32M
Price/Sales (ttm): 1.76
Price/Book (mrq): 123.33

52-Week High
(Jun 30, 2011): 1.92
52-Week Low
(May 22, 2012): 0.64

50-Day Moving Avg: 0.88
200-Day Moving Avg: 1.15

Avg Vol (3 month): 77,595
Avg Vol (10 day): 25,357

Shares Outstanding: 28.86M
Float: 24.03M
% Held by Insiders: 17.66%
% Held by Institutions: 8.40%

Volume has clearly dropped since May 21st when Oculus received a letter from the Listing Qualifications staff of The NASDAQ Stock Market LLC, notifying the Company that OCLS has failed to maintain a minimum Market Value of of $35 million. OCLS has 180 calendar days, or until November 19, 2012, to regain compliance with the Rule.

Seems strange since OCLS began trading in January of 2007 at around $8.00 per share. Optimistic investors bid the stock price up to $11.00 when Oculus only had around $2 million in annual revenue, one product, and almost no track record. Five years later, the Company has proven itself which begs the question: Why is Oculus, which is in an obvious position of revenue power compared to five years ago, trading at just 0.74?

In 2007, the Company was nowhere near profitability whereas now they are on the cusp of being in the black, but the PPS is over 93% lower than the $11.00 peak when the Company did exactly what you would expect: perform like a champion. Here are some of Oculus’s advancements since going public:

• Revenues have grown from $95 thousand in 2004, to $9.75 million in 2011. The revenue performance over the last four fiscal years is impressive:

  • Fiscal 2008 revenue: $3.34 million
  • Fiscal 2009 revenue $5.36 million, a 60% increase
  • Fiscal 2010 revenue $7.36 million, a 37% increase
  • Fiscal 2011 revenue: $9.75 million, a 32% increase

• Receiving 30% royalty fees while the partners incur all marketing and distribution costs
• 2004: 1 product, 2011: over 50 products
• Projected revenue growth of 30% to 35%
• No substantial increase to expenses while growing revenues
• Earnings beat guidance for the last 6 consecutive quarters
• Consistently producing 60% or greater operating margins
• Treating over 3.5 million patients with no adverse side effects
• A clinical trial in which patients treated with Microcyn® alone achieved a 93.3% success rate compared to 56.3% for patients treated with the gold standard of care: Levofloxacin plus saline
• Not 1 or 2 but 7 FDA clearances and more pending

About OCLS Stock

Oculus Innovative Sciences, Inc. develops, manufactures and markets a family of tissue care products that, based on country specific regulatory clearances, is designed for a variety of indications ranging from wound care dressing, irrigation and management to treating infection and enhancing healing while reducing the need for antibiotics. The Company’s platform technology, called Microcyn®, is a proprietary solution of electrically charged oxychlorine small molecules designed to treat a wide range of organisms that cause disease (pathogens).

Bottom Line: With only 28,855,729 shares outstanding, OCLS should be on of the hottest penny stocks in the market right now, especially since they received the NASDAQ warning regarding Market Cap being lower than $35 million. Anyone see what happened to MVIS when they got that same letter.

OCLS would be a perfect fit for the exiting portfolio of Johnson & Johnson (NYSE: JNJ). JNJ has the low cost OTC antiseptic market covered with Neosporin, but it really has no high-end products that equal the efficacy and more importantly, safety, of Oculus’ products.

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