Orchid Cellmark a DNA Play

Orchid Cellmark Inc. (ORCH - Analyst Report) is a leading provider of DNA testing services for forensic, human identity and agricultural applications in the U.S. and the U.K.

Through its facility in the U.K., Orchid conducted genotyping services under the U.K. government's project to help British farmers breed sheep with reduced susceptibility to the animal disease scrapie. The company expanded its reach in the U.S. with the acquisition of ReliaGene in October 2007.

The company is now leveraging its expertise in DNA testing to enter into new markets like pork traceability, immigration testing and security applications. The company has won a major part of the mega tender in the U.K., which will result in annual revenues of $10 million for the next 3 years.

We believe it is the right time to accumulate Orchid stock as we anticipate significant appreciation in the stock price in the near future. We arrive at our target price of $2.00 by applying a diagnostics industry P/E multiple of 30x to our 2011 EPS of $0.12 million, discounted back at 25% for 2 years.

Maharathi Basu contributed to this report.

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