MASI: I see morning star quotes $109 as fair value for this medical company while the stock price is around 85 range. The results are good, but it is low priced. I have been watching that this stock stay at the same range more than 5-6 months.
Am I missing something ?
Here are the analysts remarks
Investment Thesis
Jake Strole, Eq. Analyst, 05 March 2018
Masimo has established itself at the forefront of algorithms and sensor technologies for patient monitoring through the development of its proprietary signal extraction technology, or SET, for use in pulse oximetry and other measurement applications. The SET platform is magnitudes ahead of the competition in terms of accuracy and reliability, which allowed Masimo to break Covidien’s monopolistic hold on the market and ultimately become the leading company.
Masimo has developed a hybrid go-to-market model that has allowed for the proliferation of its SET and next-generation rainbow SET measurement parameters through direct sales of Masimo monitors and through third-party OEM partners. The company leverages this installed base to drive utilization of its reusable and disposable sensors, which represent high-margin recurring revenue. This strategy has generated returns on invested capital substantially ahead of weighted average cost of capital each year since the 2007 initial public offering, and we believe ROIC is poised to rise higher over our forecast period. Management has transitioned from an infrastructure buildout mentality to one of measured investment, and the financials have begun to show improved leverage. Further, the recent settlement and joint venture agreement with Royal Philips represents, in our view, one of the most significant milestones in the company’s history. While the partnership is still in its early days, we think the long-term outlook for Masimo is exceedingly bright.
We view the company as having built a narrow moat for itself in patient monitoring through strong intangible assets protected by patents and proprietary trade secrets, as well as switching costs that have been embedded in its installed base. A strong top-down push to integrate Masimo sensor technology in Philips’ leading line of patient monitors will expand Masimo’s share of the installed base while upgrading customers to the company’s next-generation rainbow SET. This should help to not only better protect its intangibles-based moat source, but also raise the bar for competitors looking to catch up.
Analyst Note Jake Strole, Eq. Analyst,
28 February 2018 Narrow-moat Masimo posted fourth-quarter and full-year results that, from an operating perspective, modestly beat our expectations across the board. As we update our model, we'll likely leave our fair value estimate unchanged due to the strong results and initial 2018 guidance that trended toward our more bullish forecasts. The primary driver of the sizable headline beat came from the quicker-than-expected realization of deferred revenue associated with the integration of Masimo's technology with Philips' line of patient monitors under the terms of the two companies' partnership agreement. Backing out this one-off item, product gross margin fell largely in line with our expectations, while the main bottom-line driver came from strong operating leverage.
From our perspective, 2018 is setting up to be another great year for the company--positively inflecting product sales (particularly through the original equipment manufacturer, or OEM, channel), a faster-than-expected on-boarding process with Philips, and a burgeoning cash pile all point to revenue guidance that appears characteristically conservative. We're forecasting product sales that maintain the business' current pace of growth of near 11%, versus guidance that implies 9% growth year on year.
We think the firm's results support our positive moat trend rating and signal that the firm is on track to strengthen the intangible assets and switching costs that underpin its narrow moat. The faster-than-expected recognition of deferred revenue and dramatic acceleration of rainbow SET activations in the quarter suggest the Philips partnership is going better than initially thought, a key component of our positive outlook. Further, management provided encouraging commentary around pricing, implying that the firm continued to gain share, by our estimate, while maintaining its existing pricing structure versus more aggressive competition.
Submitted March 06, 2018 at 09:12AM by firebyrealestate http://ift.tt/2I57Nrw
