Synovis Life Technologies reported a slight sales beat that produced a strong EPS beat. Sales rose 19% from a year ago, again driven by high-margin product Veritas. EPS of .11 were ahead of the .08 consensus though down from a year ago due to the costs of the Pegasus aquisition as well as an increased investment in sales.
Veritas grew 93% from a year ago and 35% from last quarter - it's now 23% of sales. PSD continues to suffer from competition, declining 7% (growing slightly sequentially). Tissue-Guard grew 4%, a bit faster than last quarter's 1% growth. Microsurgery grew 27% on the back of a new product, though this was a bit slower than last quarter. The new OWC products (Pegasus) totaled about 500K - it will be interesting to see what they say about H2, which is when they were expecting more meaningful contribution.
Growing sales organically by 16% is quite exciting. The fact that expenses grew by 39% is hiding the story here, but I expect that it will become more recognized over the next few months. Cash grew from $56mm to $59mm - the market cap at 13.65 is just $156mm. As OWC sales kick in and the core business grows, sales growth could be 30% or more next year. Expenses should grow much slower, producing EPS growth (off of low comparisons) of over 100% in the October and January quarters. Next fiscal year (10/11) is currently estimated to be 65% higher than this year, but I think it is too low at .67. If we go with that number though, apply a 25 PE (reasonable for a high-growth company like this) and then add back the $5 a share in cash, we get almost $22 a share (this is a five-month target). My one-year target was 25 and may go up slightly.
Comments