On Monday, Needham raised the price target for Merit Medical Systems , Inc. (NASDAQ: NASDAQ:MMSI) to $93 up from $85, while 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 anticipated 2023 sales.
The EsophyX Z+ is an implantable device designed to treat acid reflux by restoring the gastroesophageal flap valve, thereby shielding the esophagus from stomach acid. Needham views this acquisition as a strategic complement to Merit Medical's existing portfolio of endoscopy products.
Merit Medical's management anticipates that the deal will initially have a dilutive effect on the company's non-GAAP operating margin and earnings per share (EPS) for the year 2024. However, they expect it to be accretive to the company's non-GAAP gross margin, operating margin, and EPS for the full year 2025.
Despite the acquisition, Merit Medical has reaffirmed its previous revenue guidance, which excludes the impact of the new deal. Nevertheless, the company has revised its non-GAAP EPS forecast downward for 2024 to reflect the financial implications of the transaction.
Needham's revised stock price target reflects a positive outlook on the acquisition, deeming the price paid by Merit Medical as reasonable. The firm's analyst cited the expansion of peer multiples as a contributing factor for the increased price target.
InvestingPro Insights
As Merit Medical Systems, Inc. (NASDAQ: MMSI) embarks on its strategic acquisition of the EsophyX Z+ device, the company's financial metrics and market performance provide a comprehensive 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 is trading at a significant earnings multiple. This is further underscored by the adjusted P/E ratio for the last twelve months as of Q1 2024, which stands at 47.75. The company has demonstrated solid revenue growth of 9.39% during the same period.
InvestingPro Tips indicate that while net income is expected to grow this year, analysts have revised their earnings expectations downwards for the upcoming period. Moreover, Merit Medical trades with low price volatility and its liquid assets exceed short-term obligations, suggesting a stable financial position.
The company is also noted to be trading near its 52-week high, with its price at 98.6% of this peak. Investors looking for detailed analysis and additional insights can find more InvestingPro Tips, with a total of 14 tips available, which can be accessed at https://www.investing.com/pro/MMSI. To delve deeper into these metrics and benefit from further financial analysis, use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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