This article (or any on this site) was not assisted by AI in any manner.
In my perpetual quest to scrape the bottom of the investment barrel for the last few morsels of marginally edible grub, I have encountered quite a few companies over the past couple decades that I investigate and then decide to let mentally collect dust, only to have them emerge from their deep slumber and end up with me throwing some capital in their direction.
One example of this was Yellow Pages which I had the misfortune of losing some money in them in the early 2010’s and fortunately later that decade was able to obtain my capitalist revenge on them (note: never forget the cliche of “you don’t have to recover losses using the same financial instruments which caused them in the first place”, it doesn’t always end up working out!). Shockingly, they still generate cash flow although I think the “melting ice cube” is within a reasonable fair value.
The most recent example is Utah Medical Products (Nasdaq: UTMD) that I have known about for about 15 years but never gave them any attention until recently.
You can run their 10-K through an AI machine and get a reasonable summary, but a long story short is they are a small-scale manufacturer and seller of gynecology, andrology and urological products, some selling much more than others. The Filshie clip (a device used to clamp fallopian tubes, contrasted with surgical cutting) consists of a quarter of their revenue. 57% of their 2024 revenues are US domestic, with the other jurisdictions being western countries.
Financially the company received some tailwinds due to Covid spending, but one of my investment theories is that we are almost through the removal of the perception of tailwinds. The company’s reporting is relatively blunt, with page 9 and 10 of their 10-K being relatively insightful – competitive factors and various contractual issues are leading to a decline in revenues.
Despite this, the company has been able to generate ample amounts of cash flow and their balance sheet remains flush with cash – just under half the company’s market cap is in cash, with little in the way of material liabilities. The very trivial paper napkin valuation is a company that generated 14 million in cash flow over the past 12 months with an EV of about $104 million gives a 13.5% yield (7.4x) on EV.
However, the whole world can see this, so this information is not relatively relevant. It does give a relative hint, however, of a limited amount of downside.
Looking at miscellaneous factors, we have the following, in no particular order of importance, positive or negative:
1. Their website looks like it was built in the 1990’s, which makes me like them a bit more. If you got me to design something, it would probably end up looking like this.
2. In case if you thought this was some fluke, their UK subsidiary, Femcare, uses the same web designer.
3. Over the course of its history, the company has paid out a consistently rising dividend, but its buyback history is a little more interesting – relatively small stuff except in 2016 (which was when they were on the verge of posting better financial results) and 2020 (they bought back shares at an average price representative of the Covid drop at an average of US$80). They have been massively buying back shares in 2024 ($20 million at US$66/share) and Q1/Q2 2025 ($3.2M/US$59/share, $3.5M/US$54/share) – August 11, 2025 shares outstanding is 3,206 thousand vs. 3,630 thousand on December 31, 2023. The driving point here is that these buybacks tend to be timed at local minima and the recent buybacks have been more significant than any point in the company’s history.
4. The board of directors, five directors, is entrenched with three-year staggered terms. Two of them are older than Joe Biden. The CEO is 78 years old and been serving as CEO since 1992. In an attempt to refresh the board, Carrie Leigh, 42 years of age, was installed in the previous AGM. She is the daughter of the CEO – having previously worked at UTMD at the age of 20 to 32. She lost the election for directors, with 56% of the vote withheld against her (23% broker non-votes and 21% in favour) – a terrible ‘endorsement’ – the board installed her anyway.
5. The CEO owns 6% of the company. Other directors have roughly 1.3%. Top 5 institutions own 32%. Top 10 institutions own 46%.
6. The “build in America” mantra of the existing administration should eventually result in a minor tailwind for the company. I’d humbly submit that Utah is in the top quintile of states to do this type of business in.
7. The target market of the company’s products is declining by virtue of demographics. There may be a headwind in regards to overall spending.
8. The product space the company is involved in could generally be classified as too boring and pedestrian for additional competition, yet with some fixed advantages of incumbency (the regulatory process of certifying, approving, etc.) and also incumbency of “mind share” of those that are the end-users of the products.
9. Point #4, specifically the vote, is essentially a signal that the institutional shareholders may force a particular direction.
10. All things considered, management compensation is quite low.
11. The company owns their property.
There’s a few upside catalysts. One is that revenues (and hence gross margins/net income) stabilize and the 7.4x multiple remains constant resulting in a share price increase. Two is that the 78 year old CEO’s exit plan, instead of having his “let’s get 21% in a shareholder vote” daughter take over the business, will be through a managed buyout. A logical transaction would be to do a tax-free stock-for-stock buyout with somebody like Thermo Fisher (NYSE: TMO) who are trading at around 20x EV/EBITDA. Say UTMD sells out at 12x EV/EBITDA, that would be a 60% premium to current market value AND TMO would be able to scoop up a (much smaller) firm at a lower multiple to its own stock. Win-win!
UTMD is not an exciting company. The stock is relatively illiquid, the industry is very mature, management and board is (apologies to them) stale and entrenched albeit seemingly reasonable capital allocators by not blowing it on pet projects and actually being one of the few teams that can do stock buybacks at a proper price. The result is that this isn’t exactly a stock that will be on anybody’s radar or mentioned at cocktail parties lest you put the person you are talking to asleep. The downside appears limited, especially given the ample amounts of cash stacked up in the bank account and being used to repurchase stock in the 50s. Eventually the supply out there will shrink and result in higher prices.
To summarize – appears to be a relatively low risk, medium-reward type situation. Long.