LeMaitre Vascular

LMAT : NASDAQ

 US$8.04 
BUY  Target: US$11.50

COMPANY DESCRIPTION

LeMaitre Vascular markets devices used to treat peripheral vascular disease (PVD) in either a surgical or endovascular setting. Open vascular surgery products comprise ~71% of sales, with endovascular and general surgery accounting for 21% and 7%, respectively. LeMaitre has over 65 direct sales reps and also uses distributors. The company has a diversified product portfolio with 16 product lines.

Life Sciences — Biomedical Devices and Services STRONG Q4 HIGHLIGHTS FANTASTIC 2013; 2014 GUIDANCE PORTENDS MORE GOODTHINGS TO COME; BUY 

Investment recommendation

We reiterate  our bullish call on LMAT, recommending small-cap investors build positions in what we believe is one of the most under- appreciated companies in med-tech. LMAT ended 2013 on a strong note, reporting stellar Q4 sales growth +21% and +12% organic – which blew past our/consensus estimates and represented the fifth consecutive quarter of double-digit growth. The XenoSure juggernaut kept rolling in Q4 and showed no signs of letting up, with Y/Y sales growth of 42%, while the recent Inavein acquisition helped boost Q4 revenue above expectations. The only “put” on otherwise fantastic Q4 numbers was lower-than-expected gross margin, which at 66.7% fell below our 70% projection. However, we believe the factors pressuring gross margin – XenoSure transition costs, product mix, and acquisition-related expenses – will begin to abate in 2014 and we expect margins to accelerate in 2H:14 back to the 70% level.
We maintain a favorable view of LMAT given the strength of its underlying business and potential for enhanced growth via tuck-in acquisitions. We recommend small-cap investors accumulate shares. We maintain our BUY rating and $11.50 12-month price target.
Investment highlights  First-time 2014 guidance calls for sales of $70.2M (+9%), 8% op margin, and XenoSure sales growth of 33%, and margins to exit the year at or above 70%. Meanwhile, the stock trades at just 1.5x EV/2014E sales.

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