Consistent growth in top and bottom lines
Globus Medical Inc (NYSE:GMED) is the developer of more than 110 products for the treatment of patients with spine disorders, with two main product categories: Innovative Fusion products and Disruptive Technology products. Most of its revenue, $238.7 million, or 61.8% of the total 2012 revenue, was generated from the the Innovative Fusion product category, while the Disruptive Technology product category contributed nearly $147.3 million in sales in 2012. The majority of its sales, $355.6 million, were derived in the U.S.
In the past three years, Globus Medical Inc (NYSE:GMED) has experienced consistent growth in both top and bottom lines. Revenue has increased from $288 million in 2010 to $386 million in 2012 while net income has risen from $54 million to $74 million during the same period. In 2012, the company generated $77 million in operating cash flow and $52 million in free cash flow. What I like about the company is its strong, debt-free balance sheet. As of March 2013, it had $408 million in equity, $162 million in cash, and no debt.
The cheapest valued company among its peers
At $15.30 per share, Globus Medical Inc (NYSE:GMED) is worth nearly $1.4 billion. The market values the company at 9.6 times EV/EBITDA. Compared to its peers NuVasive, Inc. (NASDAQ:NUVA) and Stryker Corporation (NYSE:SYK), it is the cheapest valued among the three.
NuVasive, Inc. (NASDAQ:NUVA) is trading at around $22.20 per share with a total market cap of $982 million. It has a much higher EV multiple of 11.65. NuVasive, Inc. (NASDAQ:NUVA) has kept expanding its footprint via acquisitions. In the beginning of May, it announced that it has acquired ANC, a spine implant maker in Dayton, Ohio. This acquisition could be considered a vertical acquisition, as ANC has been one of the company’s implant suppliers. The total purchase price is around $4.5 million.
This vertical integration is expected to bring significant synergy for NuVasive, driving the company’s long-term profitability. Alex Lukianov, the company’s Chairman and CEO said: “Bringing portions of our manufacturing in house is a key element of our ongoing commitment to improve operating profitability as we grow toward $1 billion in revenue and beyond. With Speed of Innovation as a fundamental cornerstone of our success, the acquisition will reduce the time from the concept of a new idea to ultimate market introduction, enabling development and manufacturing to work seamlessly in launching our innovative solutions.”
Stryker Corporation (NYSE:SYK) is the biggest company of the trio, with $25.4 billion in total market cap. It also has a high valuation with the EV multiple at 11.77. In the beginning of this year, Stryker spent around $764 million in cash to acquire Trauson Holdings, the leading trauma maker in China. Stryker Corporation (NYSE:SYK) expects that this acquisition would be a critical step to expanding its footprint in the growing Chinese orthopedic market. Stryker could take advantage of Trauson’s manufacturing capabilities, and especially, its distribution network in China.
What I like about Stryker is its consistently growing dividend payments in the past ten years. The dividend has risen from $0.07 per share in 2003 to $0.90 per share in 2012. At the current trading price, Styker offers shareholders a decent dividend yield of 1.50%. Both of its small peers, Globus Medical Inc (NYSE:GMED) and NuVasive, have not paid any dividends yet.
My Foolish take
Among the three, I like Globus Medical Inc (NYSE:GMED) the most with its lowest EV multiple and debt-free balance sheet. Wall Street expects the company to generate more than $488 million in revenue and $0.93 in EPS, a higher growth rate than industry peers.
The article This Medical Device Maker Looks Like a Good Pick originally appeared on Fool.com and is written by Anh Hoang.
Anh HOANG has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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