Under Review: Semler Scientific Inc.

Ticker SymbolSMLR
Address2344 Walsh Avenue,
Santa Clara, CA 95051,
United States
Year Of Establishment2007
FounderDr. Herbert J. Semler
Date of Diligence22 november 2023
Share Price on DOD$37,57
Market Cap on 22/11/23$258,24M
PE-ratio on 22/11/2314.50
Shares Outstanding6.85M
Latest Annual Report2022

Description of the company

Semler Scientific Engages in:

Developing technological solutions to improve the clinical effectiveness and efficiency of healthcare providers. SMLR does this by marketing innovative products and related services. In this way, SMLR helps these healthcare providers and therefore Semler Scientific's customers to provide a faster and clearer evaluation of the health status of their patients' healthcare providers.

Currently, Semler mainly offers 2 products that are responsible for turnover. The patented product approved by the FDA (Food and Drug Administration) is called QuantaFlo PAD & QuantaFlo HD.

Semler mainly focuses on 2 diseases:

1. Peripheral Artery Disease or PAD

See Wikipedia link to understand what this disease actually means.

2. Heart Dysfunction or HD

See Wikipedia link to understand what this disease actually means.

Why this Company? ⇑ index

As indicated on the homepage, I screen companies based on certain conditions. These conditions take into account what a good company must meet. After I have set my stock screener so that it meets these conditions, I come across certain companies. SMLR was one of them.

During my search I did not come across any other companies with the required conditions that I consider important and are therefore competitive with Semler Scientific. Hence my choice.

QuantaFlo PAD & QuantaFlo HD ⇑ index

The QuantaFlo PAD

"The QuantaFlo PAD is a four-minute in-office blood flow test. Healthcare providers can use blood flow measurements as part of their examinations of a patient’s vascular condition, including assessments of patients who have vascular disease.

The following diagram illustrates the use of QuantaFlo:

QuantaFlo PAD

QuantaFlo features a sensor clamp that is placed on the toe or finger. Infrared light emitted from the clamp on the dorsal surface of the digit is scattered and reflected by the red blood cells coursing through the area of illumination. Returning light is ‘sensed’ by the sensor. A blood flow waveform is instantaneously constructed by our proprietary software algorithm. Both index fingers and both large toes are interrogated, which takes about 30 seconds for each. The product may be used with provocative maneuvers.”

source: Semler Scientific 10-K 2022

See video for more explanation:

The QuantaFlo HD

The QuantaFlo HD is somehow similar to the QuantaFlo PAD test, but serves to preventively detect heart dysfunction!

Click here for more information about the QuantaFlo HD.

Market growth ⇑ index

With the digitalization of the current century and technological developments, it goes without saying that healthcare is also switching step by step from the old methods to the more modern methods of assisting their patients.

Since the current world is always evolving faster and faster and the shortage of personnel plays a crucial role in healthcare provision, I assume that:

See quote:

behavioural risk factors of heart disease

Source: Semler Scientific 10-K 2022

Intellectual property ⇑ index

U.S. Patent No. 7,628,760, which expires December 11, 2027.

Click here to view the intellectual property.

Costumers of Semler ⇑ index

semler costumers

Source: Semler Scientific 10-K 2022

I searched the internet and found these 2 possible customers:

Competition ⇑ index

As for the competition of Semler Scientific, I have not found any significant competitors.

The only form of competition I found are the older PAD and HD tests.

1.The ABI test is used to replace the QuantaFlo PAD.

Click here to see what the ABI test entails. This test is not reimbursed and must be performed by a specialized doctor in the appropriate setting. The test takes an average of 10-20 minutes.

The QuantaFlo, on the other hand, takes 5 minutes. The test results are also immediately available, which benefits the patient.

Video of the Ankle Brachial Index (ABI) Test:

2.The echocardiography is used to replace the QuantaFlo HD.

Click here to see what de echocardiography entails. This test takes between 35 and 60 minutes and must be performed by a heart specialist (cardiologist) or a doctor.

See video:


QuantaFlo PAD:

semler medicare advantage

Source: Semler Scientific 10-Q august 14, 2023

Ankle Brachial Index (ABI) Test

This method is also NOT refundable! Which is positive in terms of competition with the QuantaFlo PAD.

medicare abi

Source: https://www.cms.gov/medicare-coverage-database/view/article.aspx?articleId=57593

QuantaFlo HD

echocardiography reimbursement

source: https://finance.yahoo.com/news/q3-2023-semler-scientific-inc-101757544.html

The above text suggests that the QuantaFlo HD may be (partially) eligible for a refund. Although I cannot confirm this with certainty yet.

Echocardiography or ECG

An ECG is reimbursed for 80% if the patient has at least Medicare Part-B.


Source: https://seniorhealthcaresolutions.com/blog/does-medicare-cover-an-echocardiogram/

Management & Direction ⇑ index

The first impression of management is positive.

It is important to indicate that management must have been active in the company for several years. Therefore not in the same position, but involved in the company's activities for several years. Which is the case here.

Link to management

Link to board of directors

The Shares ⇑ index

Insider Ownership

The management and board of directors of SMLR together own a total of 13.1% shares. Or 1.01M shares of the 6.85M shares.

When screening for companies to invest in, this company meets the requirement of having at least 10% insider ownership. In other words: the number of shares that the people involved in the business process must at least have is higher than 10%. So this company is eligible to invest in.

When the owner and employees have shares in the company, this means that these people believe in the future of the company. So they will do everything they can to grow the company, since they have invested their own money in their own company by purchasing these shares.

Share percentage of people who own more then 5%

shares semler

Semler Scientific FORM 20-K 2022

Financial Ratios (anno 2022) ⇑ index

Total Equity Total Assets Total Liabilities
$55.7M $62.7M $7M

Return On Equity: 28.2%

The ROE is above a minimum of 15% and the company therefore qualifies as an investment. The ROE was also stable in the last 2 previous years. So we assume that the company can achieve the same in the future. As long as this ratio remains above 15%.

Semler gets almost double what we need! In recent years the ROE has also been around this figure!

Return On Invested Capital: 25.22%

We would like to see a ROIC percentage above 15%. SMLR has a percentage of 25.22% which is above 15%. The rule we impose on ourselves is that we achieve a minimum ROIC of 12%. SMLR stands head and shoulders above this!

Debt to Equity: 0.14

We see that the DTE ratio is below 0.5% and this has been the case several times in the past. This fits in with our investment philosophy and Semler Scientific therefore remains a suitable investment candidate.

Free Cash Flow: $15.3M

In itself the FCF does not want to say much. Where it gets really interesting is when we put the FCF into a Discount-Cash-Flow method and we therefore calculate what the company will generate in the future. We do this very conservatively and create a DCF that is constructed with a large margin of safety!

The result of our DCF is: $300M

So we assume the company is currently worth $300M. We do make one important correction here. We take a Margin Of Safety into account and take the 300M and calculate 60% of this. Then we arrive at the amount of $180M and assume that the company is currently buyable when the company has a Market Cap of: $180M

at the time of writing, Semler Scientific has a Market Cap of $248.30M, which is above the calculated $180M. Personally, I would keep an eye on the stock from the present and wait until we get as close to the calculated amount as possible.

We then divide 180 by the number of outstanding shares (6.85M), which justifies a price of $26.27 a share.


Why should you invest Semler Scientific Inc.?

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