Thus far this has not been a great year for Penumbra (PEN), as the shares of the fast-growing vascular therapy company have sold off pretty sharply since the start of the year. This weakness has actually been going on for a while, with the shares underperforming the broader market (the S&P 500), the broader medical device market, and many growth med-tech peers since my last update a year ago.
Fundamentally, I think Penumbra is in good shape. While the recall of the Jet 7 Xtra Flex catheter has absolutely impacted the business (along with improved offerings from Medtronic (MDT) and Stryker (SYK)), the company has held up better than bears projected, and the company's peripheral and coronary businesses are performing well.
Valuation remains challenging, but is considerably more interesting than before, when valuation was the main driver of my neutral stance. Barring truly horrible markets, you're not going to get many chances to buy growth med-tech at attractive-looking multiples, but the current 9.5x or so forward multiple is pretty good for a growth med-tech subgroup that typically trades closer to 10x to 12x. With solid underlying momentum in the business, and multiple growth drivers, this is a name to consider for investors who can accept the risks and high multiples that go with growth stock investing.
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Penumbra A Little Beaten Down Despite Strong Growth Opportunities
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