LeMaitre Vascular Stock Is a High-Prospects Play on Global Healthcare

LeMaitre Vascular Stock Is a High-Prospects Play on Global Healthcare
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LeMaitre Vascular Stock Is a Beaten-Down Medical Devices Play for 2019

In my search for small-cap contrarian ideas that could rally in 2019, I’m intrigued by the opportunity in LeMaitre Vascular Inc (NASDAQ:LMAT), a developer of innovative devices and solutions for battling vascular diseases.

Given that LMAT stock is down 36% over the past three months and 45% from its April 2018 high, I see an aggressive opportunity after the move to the 52-week low of $21.79 on December 24.

With a market cap around $445.0 million, LeMaitre Vascular is small, but it has been delivering revenue growth along with positive earnings before interest, taxes, depreciation, and amortization (EBITDA), profits, and free cash flow (FCF).

LeMaitre Vascular‘s pipeline comprises a broad range of vascular devices, implants, and services used to treat peripheral vascular disease. In all, the company has 14 product lines offered in over 80 countries.

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LeMaitre Vascular has grown both organically and via an aggressive acquisition path that included 19 companies during the last two decades.

LMAT stock has been on a nasty sell-off after failing to hold its previous sideways channel between $26.00 and $29.00. On the chart, the stock displayed a bearish death cross and large downside trade gap.

Chart courtesy of StockCharts.com

In my view, LeMaitre Vascular stock could rally back toward $30.00 if the broader market stabilizes.

Strong Fundamentals Support Bull Case for LMAT Stock

LeMaitre Vascular has delivered higher sequential revenue in four consecutive years from $63.9 million in 2013 to $100.9 million in 2017. The growth in 2016 and 2017 was above the four-year compound annual growth rate (CAGR) of around 12.1%.

Fiscal Year Revenue (Millions) Growth
2013 $63.9
2014 $70.4 10.2%
2015 $77.6 10.2%
2016 $89.2 14.9%
2017 $100.9 13.1%

(Source: “LeMaitre Vascular Inc.,” MarketWatch, last accessed January 2, 2019.)

A concern among investors is the expected decline in the revenue growth rate, which will need to be addressed by LeMaitre Vascular’s management.

It’s estimated that the company grew its revenue in 2018 by 2.2% to $103.1 million. In 2019, it’s estimated to come back with an improved 8.3% growth rate—to $111.7 million. (Source: “LeMaitre Vascular, Inc. (LMAT),” Yahoo! Finance, last accessed January 2, 2019.)

LeMaitre Vascular produced positive EBITDA with strong growth from 2014 to 2017.

Fiscal Year EBITDA (Millions) Growth
2013 $7.4
2014 $10.6 42.6%
2015 $14.6 37.7%
2016 $19.9 36.0%
2017 $25.2 26.3%

(Source: MarketWatch, op cit.)

The company also produced profits with strong growth in four consecutive years.

The impressive fact is that LeMaitre Vascular has grown its EBITDA and profit at a higher rate than revenue.

Fiscal Year Diluted Earnings Per Share Growth
2013 $0.20
2014 $0.23 15.0%
2015 $0.42 82.6%
2016 $0.55 31.0%
2017 $0.86 56.4%

(Source: Ibid.)

LMAT is predicted to have increased its earnings in 2018 to $1.09 per diluted share. Looking ahead, its earnings are predicted to be as much as $1.15 per diluted share in 2019.

On its balance sheet, LeMaitre Vascular has not carried any debt in five straight years. This fact will help the company as interest costs rise.

In addition, LeMaitre Vascular has generated positive FCF, with growth in four straight years. The positive FCF will allow the company to continue with its strong dividends, which offers investors some downside cushion.

Fiscal Year Free Cash Flow (Millions) Growth
2013 $2.7
2014 $4.3 63.4%
2015 $9.2 111.3%
2016 $14.1 53.4%
2017 $16.5 17.1%

(Source: Ibid.)

Analyst Take

Investors interested in healthcare growth stocks may want to look at LeMaitre Vascular stock.

The fact that 225 institutions hold 83% of its outstanding shares suggests LMAT is doing something right. (Source: Yahoo! Finance, op cit.)