Merit Medical Systems (NASDAQ: MMSI) develops
and manufactures proprietary disposable medical devices used in interventional and diagnostic procedures, particularly in cardiology and radiology. Offerings include the catheters, guide wires, inflation devices, needles, and tubing used in heart stent procedures, pacemaker placements, and angioplasties. As well, Merit makes products for endoscopy, dialysis, and other therapeutic and diagnostic procedures. Boston Scientific (NYSE: BSX) and Johnson & Johnson (NYSE: JNJ) are major competitors.
The firm pleased investors last week, when it guided Q2 EPS to 19-21 cents and Q2 revenues to about $57.4 million. Analysts had been expecting 16 cents and $55.77 million. Gross margins for the quarter were estimated at 42.7%, which would be a 500 basis point improvement from Q2'07. CL King subsequently upgraded the shares to "accumulate".
The stock
popped on the news and has now begun to define a bullish "pennant" pattern. Prices frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Altogether, brokers recommend the shares with two "strong buys", two "buys" and one "hold". Analysts expect a 20% average annual growth rate, through the next five years. The MMSI Price to Book ratio (2.88), Price to Free Cash Flow ratio (25.88), EPS Growth rate (50.00%), Operating Margin (11.93%) and Return on Assets (8.46%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 82% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $10.89 and $19.48. A stop-loss of $16.50 looks good here. Note that the firm is expected to report Q2 results on July 23rd, after the close.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.
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