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Credit Suisse Takes Neutral Stance On Mednax, Says Buyout Value Reflected In Share Price

Credit Suisse Takes Neutral Stance On Mednax, Says Buyout Value Reflected In Share Price
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MEDNAX, Inc. (NYSE: MD) has continued to pursue acquisitions to grow its radiology business segment, making the company a potential private equity target. The company's takeout value appears to be reflected inits valuation, limiting any compelling risk-reward opportunity, according to Credit Suisse.

The Analyst

A.J. Rice of Credit Suisse initiated coverage on Mednax with a Neutral rating and a $57 target price.

The Thesis

Mednax has consistently acquired 10-15 practices annually, primarily through the company’s Pediatrix business, Rice said in a Tuesday note. Since 2012, the company has shifted its focus to radiology and used its vRad teleradiology business as a selling point, the analyst said. 

“MD makes the case that vRad can be used in ways that benefit facility-based physicians financially and otherwise. For example, rather than having radiologists cover at night, vRad can provide coverage for those needs at lower utilization times," Rice said. 

Since December 2017, reports have pointed to takeout interest from private equity firms. In November, activist investor Elliott Management disclosed it had exposure to Mednax and announced plans to engage with the company’s board to discuss strategic options, according to Credit Suisse. 

The value of a potential takeout could already be reflected in Mednax's share price, the analyst said.

“Given the run-up that the shares have enjoyed since disclosure of Elliott’s involvement in November 2017, the current valuation does not, in our view, offer a compelling risk-reward opportunity.”

Price Action

At the time of publication, shares of MEDNAX were trading down 0.35 percent at $54.87. 

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Latest Ratings for MD

Sep 2018Bank of AmericaUpgradesUnderperformNeutral
Aug 2018Credit SuisseUpgradesNeutralOutperform
Jul 2018Leerink SwannInitiates Coverage OnMarket Perform

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