Today’s Daily Alert recommendation comes from Canaccord Genuity analyst William Plovanic.
“We are initiating coverage of Globus Medical, Inc. (GMED, $15) with a BUY rating and $20.00 price target. We believe Globus is one of the best properties on a bad street, but that the neighborhood [the medical device industry] has stabilized and is likely to experience better times.
“Continuous new product flow and distribution expansion are the hallmarks of successful med-tech companies, and Globus has continued to execute on this strategy. This strategy has also helped counter industry headwinds and allowed Globus to keep growing in a no-growth market. Lastly, Globus’ profitability is well above other pure plays in the space, further illustrating the strength of management. Globus has grown at multiples of the market since inception, in good times and bad. We believe stabilization in the spine industry provides an improving background for the company.
“Product development is in Globus’ DNA. The company has launched 100 products, or approximately 10 new products per year, since 2003. Expanding distribution both in the U.S. and outside the U.S. should keep the wheels in motion. Globus is expanding in the U.S. spine implant market at 10%-15% per year with a hybrid model, and is also building its direct presence in the U.S. and internationally.
“Globus has financial discipline unlike anything we’ve seen in pure-play spine companies, [with] solid cash flow and above-industry EBITDA margins. Valuation: [GMED is] undervalued in our opinion. Our price target of $20.00 is derived by multiplying our 2013 EPS estimate of $0.82 by the comp multiple of 25.1.”
- William J. Plovanic, CFA, Canaccord Genuity Research, August 28, 2012