Spectranetics in Competitive Field

Spectranetics Corporation (SPNC) reported Q2 EPS that were lower than our estimate by $0.02 on revenue that exceeded our forecast. We increased our FY08 revenue estimate and lowered our FY08 EPS estimate accordingly. The management again reiterated its FY08 guidance.

At its current price of $8.55 per share, SPNC is trading at 2.3x our next fiscal year revenue estimate of $128 million, which is at a discount to the group average multiple of roughly 3.4x. Risks to growth may continue to place some downward pressure on the stock price. The company continues to drive revenue growth in the high double digits from the successful initiatives at driving greater awareness and acceptance in using laser technology to treat cardiovascular disease.

The rental program is leading to greater laser placements, which is driving disposable products revenue higher. New products like the TURBO-Booster are expected to help the company penetrate further or expand targeted markets. In particular, the TURBO-Booster allows SPNC to participate fully in above the knee procedures that in the U.S. comprise according to SPNC two-thirds of all endovascular procedures in the leg.

The growth in atherectomy is now expected to be driven by above the knee procedures as growth from below the knee procedures is expected to decelerate from the increase in competition. Furthermore, SPNC continues to expand its sales force. The risks to growth include such items as a possible increase in competition in the atherectomy market, possible disruption to operations from the relocation and consolidation of U.S. operations, and the increase in SG&A and R&D spending. We believe the stock is fairly valued at roughly 2.6x our 2009 revenue estimate. Our target price is therefore $9.50.

Read the full analyst report on SPNC

"SPNC" Free Stock Analysis: Buy? Sell? Hold?
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