LMAT - A First Look At LeMaitre Vascular

2023-11-06 04:41:41 ET

Summary

• Today, we take our first look at LeMaitre Vascular, a solidly growing medical device concern.
• Despite good growth in earnings and sales, as well as a solid balance sheet, the stock is down some 30% from recent highs at the end of the second quarter.
• A 'buy the dip' opportunity? An analysis follows below.

"The art of medicine consists of amusing the patient while nature cures the disease. " - Voltaire

Today, we put medical device concern LeMaitre Vascular, Inc. ( LMAT ) in the spotlight for the first time. The company posted Q3 results earlier this month. As you can see below, the stock is off by approximately a quarter since its highs at the end of the first half of the year. Time to buy the dip in this steadily growing healthcare concern? An analysis follows below.

Company Overview:

LeMaitre Vascular, Inc. is based just outside of Boston in Burlington, MA. The company designs, markets, and services medical devices and implants for the treatment of peripheral vascular disease. These include items like allografts; angioscope, a fiberoptic catheter used for viewing the lumen of a blood vessel; embolectomy catheters to remove blood clots from arteries or veins; thrombectomy catheters for removing thrombi in the venous system as well as various other types of catheters. The company specializes in single-use devices and implants. The stock currently trades just north of $48.00 a share and sports an approximate market capitalization of $1.1 billion.

Third Quarter Results:

The company posted its third-quarter numbers on November 1st. The company posted a GAAP profit of 33 cents a share, three cents a share above the consensus. EPS was up 36% over the prior period a year ago and operating income for the quarter came in at $9.2 million, a 49% improvement from the same period a year ago. Both metrics benefited from sales growth and a solid job containing operating expense growth. Gross margins improved 80bps to 65% in the quarter.

Revenues rose just over 21% on a year-over-year basis to $47.4 million, which was just a tad light of expectations. Sales growth during the quarter was driven by the following categories: Bovine patches (+22%), valvulotome (+27%), bovine grafts (+15%), and carotid shunts (+24%). Organic sales growth came in 16% above that of 3Q 2022. Revenues also were boosted by price increases (11%) as well as a rise in medical procedures as the world puts the Covid pandemic fully in the rearview mirror. Full-time sales representatives also rose 15% globally to 136. LeMaitre also opened a new sales office in Bangkok in August, expanded its operation in Madrid in September, and should have a sales office open in France sometime in the first half of next year.

Management provided the following guidance for the fourth quarter and for FY2023 on its third quarter earnings press release :

Analyst Commentary & Balance Sheet:

Since third-quarter were results posted, Barrington ($66 price target), Oppenheimer ($70 price target), JMP Securities ($60 price target), and Lake Street ($75 price target, up from $65 previously) have reissued buy ratings on the stock. Stifel Nicolaus maintained its hold rating on the equity and lowered its price target ten bucks a share to $50.

Just under five percent of the outstanding float in the shares is currently held short. Several insiders have been frequent and consistent sellers of shares in 2023, disposing of just over $12.5 million worth of equity collectively this year. Just over $6 million of this was via one transaction by the company's CEO in early May at prices just above $63.00 share.

The company ended the first half of 2023 with $97 million worth of cash and marketable securities on its balance sheet. The firm has no long-term debt. The stock pays a small dividend with a current annual yield of 1.2% and the company has a $25 million stock buyback authorization in place as well. EBITDA came in a tad over $40 million in 3Q 2023.

Verdict:

LeMaitre Vascular produced a profit of 93 cents a share in FY2022 on just over $161 million in revenues. The current analyst firm consensus has the company making $1.28 a share in FY2023 as sales rise just over 20% followed by $1.49 a share in earnings in FY2024 on revenue growth in the high single digits.

On the plus side, LMAT is seeing solid increases in earnings and revenues and is in a recession-resistant market for the most part. LeMaitre has a solid balance sheet and management has stated it has the ' war chest ' to make strategic acquisitions if they present themselves.

The problem with putting a buy recommendation on LMAT is valuation, even after the recent pullback in the stock. The shares go for nearly 40 times forward earnings. Hardly compelling given the uncertainty of the overall market and economy and I don't blame insiders for taking some considerable profits off the table earlier this year. If the shares dip to below $40 a share, the risk/reward profile might be compelling enough for a small 'watch item' holding at that point in this steady grower.

"Declare the past, diagnose the present, foretell the future ." - Hippocrates

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