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Globus Medical Target $20

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A top and side view of the Globus Cassus

A top and side view of the Globus Cassus (Photo credit: Wikipedia)

Globus Medical

August 28

GMED : NYSE : US$15.05  Buy , Target US$20.00

Solid execution in a tough market; initiating with a BUY rating, $20 price target

Investment recommendation

 We believe Globus is one of the best properties on a bad street, but that the neighborhood has stabilized and is likely to experience better times. Continuous new product flow and distribution expansion are the hallmarks of successful med-tech companies, and Globus has continued to  ecute on this strategy. This strategy has also helped counter industry headwinds and allowed Globus to keep growing in a no-growth market. Lastly, Globus’ profitability is well above other pure plays in the space, further illustrating the strength of management

Investment highlights

Great property on a bad street. Globus has grown at multiples of the market since inception, in good times and bad. We believe stabilization in the spine industry provides an improving background for the company.

 Product development is in Globus’ DNA. The company has launched 100 products, or ~10 new products per year, since 2003.

Expanding distribution both in the US and OUS should keep the wheels in motion. Globus is expanding in the US spine implant market at 10%-15% per year with a hybrid model and is also building its direct presence both in the US and internationally.

Financial discipline unlike anything we’ve seen in pure-play spine companies. Solid cash flow and above-industry EBITDA margins.

Valuation

Undervalued in our opinion. Our price target of $20.00 is derived by multiplying our 2013 EPS estimate of $0.82 by the comp multiple of  25.1



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