BUSINESSWEEK ONLINE : MAY 22, 2000 ISSUE
BUSINESSWEEK INVESTOR -- INSIDE WALL STREET Positive Prognosis Shares of ADAC Laboratories (ADAC), a medical equipment company in Milpitas, Calif., have been ailing for the past two years. The stock brushed up against $30 in late 1998, only to plunge below $6 last August as the company racked up five straight quarters of red ink. Why? Revenues fell and past financial statements were restated to correct aggressive accounting practices. But with the success of its Positron Emission Tomography (PET) machines, ADAC is getting a new image on the Street. At 12 7/8, the Nasdaq-traded stock is up 20% this year. Some think ADAC's newfound momentum will lead its stock back near 30. Elizabeth Pearce of the HighMark Small Cap Value Fund says the outlook for PET is bright. That's because its advanced imaging system, which tracks ingested radioisotopes as they move through the body, is more effective in identifying many cancers than other imaging methods. Pearce says hospitals also have an incentive to buy the machines, which cost from $1 million to $1.3 million: PET scans are three times as profitable as CAT scans. In the December quarter, 10 machines were ordered, vs. the typical 1 to 3. During the March quarter, 16 orders came in. Analyst Juan V. Noble of Fahnestock & Co. sees earnings of 65 cents a share for the Sept. 30 fiscal year, giving the stock a relatively cheap price-earnings ratio of 20. Considering ADAC's history, investors may be wary. But Rich Beaven, an analyst for ICM Asset Management in Spokane, Wash., which owns some 7.7% of the shares, says ADAC has adopted conservative revenue recognition policies, so it's less likely to get into financial reporting straits that tripped it up in the past. By JEFFREY M. LADERMAN Gene Marcial is on an assignment and will return next week. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Positive Prognosis CHART: Back in Focus INTERACT E-Mail to Business Week Online

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