While being successful enough to dominate your market is normally a good thing, it does create some valid questions about how Varian (NYSE:VAR)
will continue to generate impressive FCF growth when it already has
about 60% share of a market that is expected to grow less than 5% a year
in the future. Faster-growing emerging markets like China can help, as
can the growth of emerging product categories like proton beam therapy,
but strong market share, good margins, and reimbursement pressure do
create some concerns.
Varian's shares look slightly
undervalued to me today and that's not a common experience in the many
years I've followed the stock. While I own the much riskier and more
undervalued Accuray (NASDAQ:ARAY),
I'm not quite as keen on Varian as I don't think the 5% to 10% upside
is sufficient reward for the risks of a further slowing of the
radiotherapy market and a Wall Street overreaction to that slowdown.
Follow this link to the full article:
Varian Medical Needs Room To Grow
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