On Monday, Needham raised their price target on Merit Medical Systems, Inc. (NASDAQ: MMSI) to $93 from $85, maintaining a Buy rating on the stock. This adjustment follows Merit Medical’s announcement of an asset purchase agreement with EndoGastric Solutions for the EsophyX Z+ device. The acquisition, valued at $105 million, represents approximately four times the device’s expected sales in 2023.
EsophyX Z+ is an implantable device designed to treat acid reflux by restoring the gastroesophageal flap valve, thereby protecting the esophagus from gastric acid. Needham views this acquisition as a strategic complement to Merit Medical’s endoscopic product portfolio.
Merit Medical executives anticipate that the transaction will initially have a dilutive effect on the company’s non-GAAP operating margin and earnings per share (EPS) for the year 2024. However, the transaction is expected to have an accretive to the company’s full-year 2025 non-GAAP gross margin, operating margin and EPS.
Despite the acquisition, Merit Medical reaffirmed its previous revenue guidance, which excludes the impact of the new deal. However, the company revised down its 2024 non-GAAP EPS forecast to reflect the financial implications of the transaction.
Needham’s revised price target reflects a positive view of the acquisition, believing the price paid by Merit Medical was reasonable. The analyst cited expanding peer multiples as a factor in the price target increase.
InvestingPro Insights
As Merit Medical Systems, Inc. (NASDAQ: MMSI) prepares for a strategic acquisition of the EsophyX Z+ device, the company’s financial metrics and market performance provide a complete picture for investors.
With a market capitalization of approximately $4.98 billion and a high price-to-earnings (P/E) ratio of 48.42, Merit Medical trades at a significant earnings multiple. This is further underlined by the adjusted P/E ratio for the trailing twelve months as of 1Q 2024, which stands at 47.75. During the same period, the company recorded solid revenue growth of 9.39%.
InvestingPro’s recommendations indicate that while net income is expected to grow this year, analysts have lowered their earnings expectations for the coming period. Additionally, Merit Medical operates with low price volatility and its liquid assets exceed short-term obligations, suggesting a stable financial position.
The company is also known to be trading near its 52-week high, with its price at 98.6% of this peak. Investors looking for detailed analysis and further insights can find more tips from InvestingPro, with a total of 14 tips available, accessible at https://www.investing.com/pro/MMSI. To dive deeper into these metrics and benefit from additional financial analysis, use the coupon code PRONEWS24 to get up to 10% off an annual Pro subscription and an annual or biennial Pro+ subscription.
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