Arrhythmia Research Technology, Inc. (NYSEAMEX:HRT): No Boost Without Good Financials

In case you took a long position in the stock of Arrhythmia Research Technology, Inc. (NYSEAMEX:HRT) within the first five months of 2011, you should probably know what happened with its market value subsequently. The latter has been on a downtrend since last June and shows no signs of coming to an end.

The latest sessions proved no exception for HRT stock as it went down in either of them. On Tuesday, HRT lost 7.8%, only to go down an additional 10% yesterday to a three-month low of $3.1624 per share on a volume of 8.6K, which, while rather moderate, is still much higher than the daily average trading volume of 4,500.

Established in 1981, Arrhythmia Research Technology, Inc. has been occupying the Medical Appliances & Equipment industry for three decades now. The company is mainly focused on developing signal-averaged electrocardiography (SAECG) systems, which, according to its management, ‘have defined the industry and clinical standards for high resolution electrocardiography. In addition, HRT claims to have its SAECG products and services recognized by research institutions, hospitals and clinics worldwide.

Until recently, HRT’s efforts to constantly improve its product lines used to bear fruit – the company’s financial results for the last ten years have all been fairly positive. Contrary to expectations, however, this is not the case in the reports covering Q2 and Q3 of 2011. The latter reveal that HRT has started incurring net losses. The company’s revenue has increased but so has its COGS. As a result, HRT’s cumulative 9-month financial result is a net loss of $302K, which means that the company will most probably close 2011 at a loss unless it comes up with an excellent Q4 report.

Even if HRT fails to end the 2011 fiscal year at a profit, there is little room for concern. First, the company has enjoyed consistent revenue for the last five quarters indicating that there is a market for its products and services. Second, HRT’s current ratio has improved for the last few years. Last but not least, the company practically has no long-term debt.

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