Another one of my former coverage names reported last week - cardiovascular imaging specialist Volcano (Nasdaq: VOLC). Even though I love almost everything about this name, you will see in the end that it is not a recommendation of mine.
So, how was the quarter?
Revenue jumped 36% to almost $74M, and that is a fine start. IVUS console revenue was up 16% to $11M, IVUS catheter revenue was up 29% to $41M, and FM revenue was up 49% to $11M. Also, the Axsun telecom business did pretty well too - "other" revenue climbed 93% to $4.3M
I do not have too much to complain about here, and my long-time readers will appreciate how rare that is. The company definitely had some juice in the gross margin line (due to higher catheter sales, as well as the sales transition in Japan), and operating results were quite good.
On top of that, it is a pretty attractive overall picture. The company continues to build its momentum against Boston Scientific (NYSE: BSX) in the IVUS space, and BSX is basically just managing that business like a declining cash cow; I really do not see any meaningful drive to innovate or reinvigorate its platform to compete with VOLC. On the FM side, doctors continue to adopt the procedure and although a lawsuit from St. Jude (NYSE: STJ) is a threat and a distraction, this is pretty typical for the medical technology industry (especially in the early sorting-out years of a sector).
Longer term, there is a lot to like here. The company is building a dominant IVUS business (somewhere north of 70% market share for new placements) and gaining share in the rapidly-growing FM market as well. Longer term, technologies like OCT (where St. Jude is also competing), forward-looking IVUS, image-guided therapy, and now intracardiac echo (which the company is gaining through another acquisition) should help boost that growth rate and make VOLC a significant player in invasive monitoring and imaging.
Now the bucket of cold water - I cannot get around the valuation. Even plugging in 20% revenue growth for five years and a FCF margin that moves up to 15% in 2015, I cannot get a price target much beyond $20.50.
Still, the stock is trading at an EV/revenue multiple of 4 and these stocks routinely trade in the 4x-8x range. Moreover, I would be amazed if this company does not get a takeout bid sometime in the next year or two (look at Abbott Labs (NYSE: ABT), Siemens (NYSE: SI), Philips (NYSE: PHG), GE (NYSE: GE), and maybe Medtronic (NYSE: MDT), Johnson & Johnson (NYSE: JNJ), or Covidien (NYSE: COV)). So, investors who can stomach the risk could certainly take the position that institutional investors pretty much ignore cash flow analysis for med-tech stocks (which is true) and simply play the valuation ratio trade.
I do not have any problem with that ... but I do not think I will be joining them. I love Volcano as a company and it was a pleasure to follow them as an analyst. But since John Dahldorf (their CFO and a good guy) cannot write me a check and compensate me if the stock goes down, I think I will pass on it for now.
Disclosure - I own shares of JNJ
Showing posts with label VOLC. Show all posts
Showing posts with label VOLC. Show all posts
Monday, August 2, 2010
Thursday, May 6, 2010
Shopping Time In Medical Technology?
The following has been posted on Investopedia:
http://stocks.investopedia.
It is a little strange for me to see ATS Medical get a bid. We banked that company when I was just a junior analyst at Piper and the CEO/founder, Manny, was (and still is) a one-of-a-kind guy. ATSI has always been something of a sad lesson for me; sad in that it proves that the best technology/product doesn't always win and that the company with the better marketing is more likely to win.
In any event, it's always fun to speculate on who may be next to go out in the space. I hope you enjoy the piece.
Amidst the paper blizzard of earnings releases, a little deal in the med-tech world took place. Medical device giant Medtronic (NYSE:MDT) announced that it was buying small cardiology company ATS Medical (Nasdaq:ATSI) for about $370 million in cash and assumed debt. The deal will bring some quality heart valve technology to Medtronic and cash to long-suffering shareholders of ATS Medical.
Buy The TechnologyThe ATSI deal is a relatively minor one in the bigger scheme of things, but it does at least highlight one type of deal that could be increasingly attractive - tucking in a small company that has good technology, but has not been able to leverage it effectively. Following this mold, investors should look for companies that have acknowledged quality technology, but for whatever reasons have not been able to deliver the growth that investors want.
You can read the rest at Investopedia: http://stocks.investopedia.
http://stocks.investopedia.
It is a little strange for me to see ATS Medical get a bid. We banked that company when I was just a junior analyst at Piper and the CEO/founder, Manny, was (and still is) a one-of-a-kind guy. ATSI has always been something of a sad lesson for me; sad in that it proves that the best technology/product doesn't always win and that the company with the better marketing is more likely to win.
In any event, it's always fun to speculate on who may be next to go out in the space. I hope you enjoy the piece.
Amidst the paper blizzard of earnings releases, a little deal in the med-tech world took place. Medical device giant Medtronic (NYSE:MDT) announced that it was buying small cardiology company ATS Medical (Nasdaq:ATSI) for about $370 million in cash and assumed debt. The deal will bring some quality heart valve technology to Medtronic and cash to long-suffering shareholders of ATS Medical.
Buy The TechnologyThe ATSI deal is a relatively minor one in the bigger scheme of things, but it does at least highlight one type of deal that could be increasingly attractive - tucking in a small company that has good technology, but has not been able to leverage it effectively. Following this mold, investors should look for companies that have acknowledged quality technology, but for whatever reasons have not been able to deliver the growth that investors want.
You can read the rest at Investopedia: http://stocks.investopedia.
Three Growth Med-Techs Show Their Cards
The following went up this morning on Investopedia:
http://stocks.investopedia.
As earnings season winds down, a relatively rare trifecta occurred May 3 as three quality growth med-tech stocks reported their earnings. Hologic (Nasdaq: HOLX), IRIS International (Nasdaq: IRIS) and Volcano (Nasdaq: VOLC) all reported earnings with varying degrees of performance.
For the full article: http://stocks.investopedia.
http://stocks.investopedia.
As earnings season winds down, a relatively rare trifecta occurred May 3 as three quality growth med-tech stocks reported their earnings. Hologic (Nasdaq: HOLX), IRIS International (Nasdaq: IRIS) and Volcano (Nasdaq: VOLC) all reported earnings with varying degrees of performance.
For the full article: http://stocks.investopedia.
Friday, April 30, 2010
Can Boston Scientific Ever Get It Right?
And so continues my long love affair with not liking Boston Scientific (BSX).
http://stocks.investopedia.com/stock-analysis/2010/Can-Boston-Scientific-Ever-Get-It-Right-BSX-STJ-MDT-ABT-VOLC0430.aspx
It is only fair to state that from the beginning that I have been a long-term skeptic and critic of Boston Scientific (NYSE:BSX), going back to the late 1990's when I covered the stock as a junior research analyst. Ever since, my skepticism has been rewarded as the company has made missteps and blunders too numerous to recount here.
With a relatively new CEO at the helm and earnings fresh on the tape, it's worthwhile to take another look at this well-known name to see if anything has changed for the better.
For the remainder of the article:
http://stocks.investopedia.com/stock-analysis/2010/Can-Boston-Scientific-Ever-Get-It-Right-BSX-STJ-MDT-ABT-VOLC0430.aspx
http://stocks.investopedia.com/stock-analysis/2010/Can-Boston-Scientific-Ever-Get-It-Right-BSX-STJ-MDT-ABT-VOLC0430.aspx
It is only fair to state that from the beginning that I have been a long-term skeptic and critic of Boston Scientific (NYSE:BSX), going back to the late 1990's when I covered the stock as a junior research analyst. Ever since, my skepticism has been rewarded as the company has made missteps and blunders too numerous to recount here.
With a relatively new CEO at the helm and earnings fresh on the tape, it's worthwhile to take another look at this well-known name to see if anything has changed for the better.
For the remainder of the article:
http://stocks.investopedia.com/stock-analysis/2010/Can-Boston-Scientific-Ever-Get-It-Right-BSX-STJ-MDT-ABT-VOLC0430.aspx
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