Jefferies Raises Estimates on Inverness Medical (IMA)
Jefferies is out with an analyst note this morning where they reiterate their Buy rating on shares of Inverness Medical (NYSE: IMA); they have a $50.00 price target on the stock.
Jefferies analysts cited their sum of the parts analysis, which showed that there is upside to IMA’s current valuation. They said “We have heard investor grumblings that IMA's disease management (DM) business has become a drag on the story given sluggish sales and lower margins. While we agree, we would point out that it should be at least valued in line with its publicly traded peer, which currently trades at ~0.8X CY11E sales. Applying this multiple to IMA's ~$613MM of DM revenues (25% of total sales) in CY11 yields an imputed DM valuation of $490MM.”
Analysts also noted that headwinds from FX movement would be in the neighborhood of $2 million this quarter and $6 million for the year.
They also reminded that IMA's base diagnostic business is facing tough comps in 2H10, given the magnitude of flu sales in 2H09. While true, many of IMA's peers are also facing tough flu comps (some with a much higher concentration of flu sales), yet are trading at higher multiples to sales. Applying a group multiple of 2.2X sales to IMA's ~$1.72B of estimated diagnostic revenues (75% of total sales) in CY11 yields an imputed valuation of $3.74B.”
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