Needham analyst Mike Matson reiterated the Buy rating on Merit Medical Systems, Inc. (NASDAQ:MMSI), lowering the price target to $81 from $96.
Merit Medical delivered a street-beating performance in Q3 2023, where reported revenue of $315.2 million was up 9.8% year-over-year.
According to the analyst, Merit Medical is undergoing a turnaround after encountering challenges with several acquisitions and seeing its operating margin decline.
Matson projects the revenue growth to return to the mid-single digits or better and EPS growth to return to 15%+.
Management is implementing a detailed plan to drive its operating margin higher and improve cash flow, with a target of reaching an 18-21% operating margin in 2023, the analyst adds.
The analyst raised 2023E and 2024E revenue estimates to $1.250 billion from $1.237 billion and to $1.340 billion from $1.327 billion, respectively. Matson also increased 2023E and 2024E EPS estimates to $2.96 from $2.91 and to $3.25 from $3.23, respectively.
However, the analyst lowered the price target to reflect a downward revaluation of the company's peers.
The analyst's 12-month price target for Merit Medical of $81 is based on a multiple of 25.0x of the analyst's new 2024E EPS estimate.
This multiple is above Merit Medical's small/mid-cap GARP medical device peers (trading at a median 2023E P/E of 21.4x) and its small/mid-cap cardiovascular peers (trading at a median 2023E P/E of 21.4x) due to its higher revenue and EPS growth.
Price Action: MMSI shares are trading higher by 7.32% to $68.14 on the last check Friday.