By:
Ryan Woo, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary
• LeMaitre Vascular, Inc. (Nasdaq:LMAT) is a medical device company
that specializes in the treatment of peripheral vascular disease through its
disposable and implantable products, which include balloon catheters, carotid
shunts, biologic patches, radiopaque marking tape and vascular grafts.
• LMAT was added to the Russell
2000 in June 2015, which has allowed the stock to garner greater attention in
the past six months.
• The expansion of the sales
force into new regions and strong demographic trends should continue to allow
LeMaitre to reach its target of 10% sales growth and 20% operating profit growth.
• A debt-free balance sheet
gives LMAT flexibility with respect to cash deployment, which can allow the
company to continue its acquisition activity, buyback shares, and/or raise its
dividend.
• Although the stock has
tumbled since reaching an all-time high of $18.44 at the end of last year due
to a broad market sell-off, there is still a large runway for growth, and it is
conceivable that shares can rise back to the all-time high.
Key
points: LeMaitre Vascular Inc. remains 'in-play'. On June 26, 2015,
LMAT was added to the Russell 2000, which has led to the increased volume over
the past six months. This should prove beneficial to LMAT stock as it allows
institutional investors to add the company to their portfolios. In addition,
passive investors and indexes have to have greater exposure to the stock.
Since the company was added to
AIM Micro-Cap portfolio in late October, LMAT has taken part in four healthcare
conferences hosted by respected equity research firms like Canaccord Genuity,
Stifel, Brean Capital, and Three Part Advisors in the middle of November. In
addition, LMAT held an investor day in early December, which emphasized its
three part strategy: the focus on the vascular surgeon, the target of niche
markets, and the growth of the company through sales force expansion, research
and development introductions, and acquisitions.
In addition to company-specific
initiatives, LMAT also has the benefit of working with a population that caters
toward the growth of its devices. Peripheral vascular disease is most common
amongst those over the age of 65. According to company data, the percentage of
the US population over 65 years old is expected to be 336 million in 2020, but
this is expected to grow to 392 million by 2040, a CAGR of 7.7% which LMAT should
be able to outperform as it gains market share in its niche markets and expands
its global reach.
What
has the stock done lately?
LMAT has been caught in the
recent market sell-off due to oil and China concerns. As a result, the shares
are down 14% YTD. The share price is still at the high end of its 52 week
high-low range of $18.44-7.36. The company is set to report earnings either
late this month or early February, which is the next catalyst for the stock.
Past
Year Performance: LMAT has increased 92.61% in value over the past
year, but the stock is nonetheless on the bargain table: LMAT's market
valuation implies a ~20% discount to its previous high in December 2015. Share
buybacks and an accretive acquisition could push the shares even higher.
Source: FactSet
My
Takeaway
LeMaitre Vascular is doing a
lot of things correctly, and further execution is key from this point going
forward. The debt-free balance sheet coupled with plenty of dry powder equals
an opportunity for LMAT to target larger acquisitions, which is beneficial as
long as the company does not overpay nor dilute margins. The expansion of the
sales force into new regions should allow LMAT to expand on its 10% market
share.
Source:
FactSet
