Tuesday, April 22, 2014

Seeking Alpha: Cepheid's Results And Shares Are On Different Paths

Within the higher-growth molecular diagnostics segment of diagnostics, Cepheid (CPHD) remains one of the real up-and-comers. Roche (OTCQX:RHHBY) still has quite a bit more market share than Cepheid (and/or anybody else), but Cepheid stands shoulder to shoulder with big names like Abbott (ABT), Becton Dickinson (BDX), and Hologic (HOLX) and actually has leading share in terms of systems placement. Margins are still a "build it and they will come" sort of proposition, but as Cepheid continues to develop and launch high-volume tests, it should be in position to reap significant leverage down the road.

The concern here is that the market is already a long ways down that road in terms of valuation. Even if the company can more than double its share of the MDx market and generate FCF margins on par with the best companies, the shares are already well ahead of the implied value. Assigning Cepheid the typical top-of-the-range med-tech growth multiple of 8.0x forward sales produces a more attractive $55 target, more than 20% above today's price, but that multiple may be harder to maintain if the market really is turning away from aggressive growth stories in the healthcare space.

Continue reading here:
Cepheid's Results And Shares Are On Different Paths

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