Needham analyst Mike Matson reiterated the Buy rating on Enovis Corporation ENOV, raising the price target to $70 from $62.
The analyst selected ENOV as his top pick for 2024 and added it to the Needham Conviction List, replacing Boston Scientific Corporation BSX.
Matson foresees multiple significant top and bottom line growth drivers in 2024, including the EMPOWR Revision launch, the ARVIS 2.0 launch, and the Lima acquisition.
Additionally, the analyst sees continued EBITDA margin improvement from ENOV's higher margin Reconstructive business outpacing its lower margin Prevention & Recovery business.
According to Matson, ENOV shares are attractively valued at 11.1x the 2024 EBITDA estimate, which represents a 27% discount to its small/mid-cap GARP peers trading at median of 15.2x 2024 consensus EBITDA.
The analyst estimates that knees account for 25-30% of ENOV's Reconstructive sales. Management estimates that revision knees account for 15-20% of the knee market, and the company hasn't previously had a knee revision offering, the analyst underscores.
Matson expects the EMPOWR Revision system commercial launch to build momentum during 2024 as ENOV manufactures and places instrument sets and trains surgeons.
According to the analyst, a mix shift favoring Enovis's higher growth and higher margin products will accelerate revenue growth over the next few years.
The analyst also projects Enovis to pursue additional acquisitions and notes that these will be accretive to EBITDA and EPS.
Matson expects the company to report FY23 EPS of $2.32, with revenues of $1.698 billion.
Price Action: ENOV shares are trading lower by 0.47% to $53.45 on the last check Friday.
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