On Friday, Goldman Sachs initiated coverage on LivaNova PLC (NASDAQ:LIVN) stock, a global medical technology company, assigning a Buy rating and setting a price target of $65.00. The firm's analysis suggests potential growth for the company despite past challenges that have affected its stock performance.
LivaNova's shares have encountered difficulties achieving consistent outperformance due to strategic changes within the company and setbacks in its product pipeline. These issues have exerted downward pressure on its earnings and price-to-earnings (P/E) multiple, which currently stands at 16.6x next twelve months (NTM) consensus P/E, compared to the S&P 500's 21.3x.
Goldman Sachs anticipates that as LivaNova produces consistent results and improves its margin profile, the period of underperformance will become a thing of the past. The firm expects the company's base business to exhibit approximately 5% annual revenue growth, driven by stable end markets and new neuromodulation implant sales, alongside a boost from an upcoming product cycle upgrade in cardiopulmonary, which accounts for 52% of sales.
The firm also projects further revenue increases from distinct pipeline initiatives and market share gains, potentially leading to results that surpass consensus forecasts. Goldman Sachs forecasts that sustained revenue growth, an enhanced product mix, and more focused profit and loss (P&L) management will contribute to outsized earnings per share (EPS) growth, estimated at around 14% per year through 2027.
In other recent news, LivaNova PLC has been experiencing significant growth, with a 10% revenue increase reported in the second quarter of 2024. This marks the company's sixth consecutive quarter of double-digit growth, primarily driven by its cardiopulmonary and epilepsy segments. As a result, LivaNova has raised its full-year revenue and adjusted earnings per share (EPS) guidance for 2024.
Baird has upgraded LivaNova's stock from Neutral to Outperform, citing strengthened long-term growth prospects. Despite anticipated earnings per share (EPS) headwinds due to a likely payout related to the SNIA agreement, Baird views the risk/reward balance for LivaNova as favoring the upside.
In addition to financial developments, LivaNova announced the upcoming departure of its Chief Human Resources Officer, Trui Hebbelinck, effective September 30, 2024. The company has begun the search for a replacement with the assistance of an external firm. These recent developments are part of LivaNova's strategic plans to invest in its core businesses and maintain above-market growth.
InvestingPro Insights
Recent data from InvestingPro adds depth to Goldman Sachs' optimistic outlook on LivaNova PLC (NASDAQ:LIVN). The company's market capitalization stands at $2.89 billion, with a revenue of $1.21 billion for the last twelve months as of Q2 2024, showing a robust growth of 11.52%. This aligns with Goldman Sachs' projection of consistent revenue growth.
InvestingPro Tips highlight that LivaNova's net income is expected to grow this year, supporting the firm's forecast of outsized EPS growth. Additionally, the company operates with a moderate level of debt and has liquid assets exceeding short-term obligations, which could provide financial flexibility for the anticipated product cycle upgrades and pipeline initiatives.
The current P/E ratio (adjusted) of 20.08 is higher than the 16.6x NTM consensus P/E mentioned in the article, possibly reflecting recent market optimism. However, investors should note that the stock's RSI suggests it may be in overbought territory.
For readers interested in a more comprehensive analysis, InvestingPro offers 5 additional tips for LivaNova, providing a deeper understanding of the company's financial health and market position.
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