Merit Medical Systems Inc (MMSI, Financial) recently experienced a notable dip of -11.37% in its stock price, yet over the past three months, it has gained 2.57%. With an Earnings Per Share (EPS) of 1.73, investors are prompted to consider whether the current market valuation fairly reflects the company's true value. Is Merit Medical Systems modestly undervalued? This valuation analysis aims to answer that question and invites readers to delve into the financial nuances that determine MMSI's market position.
Company Introduction
Merit Medical Systems Inc is a distinguished player in the medical equipment industry, focusing on interventional cardiology, radiology, and endoscopy. The company operates primarily through two segments: Cardiovascular and Endoscopy, with the former being the main revenue generator. Predominantly, its financial success is rooted in the United States market. When juxtaposing Merit Medical Systems' stock price of $65.53 against the GF Value of $73.42, a notable disparity emerges, suggesting a potential undervaluation. This comparison sets the stage for a deeper evaluation of the company's intrinsic value, blending financial metrics with key business insights.
Summarize GF Value
The GF Value is a unique metric that determines the intrinsic value of a stock. It incorporates historical trading multiples, an adjustment factor based on the company's past performance, and projected future business outcomes. Merit Medical Systems (MMSI, Financial) appears modestly undervalued according to this measure. The company's market cap stands at $3.80 billion, with the current stock price hinting at a promising investment opportunity. The long-term return of MMSI's stock is likely to outpace its business growth, given its relative undervaluation.
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Financial Strength
Investing in firms with robust financial strength minimizes the risk of capital loss. Key indicators like the cash-to-debt ratio, which for Merit Medical Systems is at 0.17, reveal the company's financial resilience despite being lower than 88% of its peers in the Medical Devices & Instruments industry. GuruFocus rates Merit Medical Systems' financial strength as a robust 8 out of 10, signifying a strong financial foundation.
Profitability and Growth
A hallmark of less risky investments is consistent profitability. Merit Medical Systems has a commendable track record, being profitable for 9 out of the past 10 years. With annual revenues of $1.20 billion and an Earnings Per Share (EPS) of $1.73, its operating margin surpasses 66.18% of industry competitors. GuruFocus ranks the company's profitability as strong, reflecting its solid performance potential.
Growth is pivotal for valuation, and Merit Medical Systems' 3-year average annual revenue growth rate of 4.1% is commendable, albeit not industry-leading. The company's 3-year average EBITDA growth rate of 14% is a positive sign, indicating a healthy expansion trajectory.
ROIC vs WACC
Comparing Return on Invested Capital (ROIC) with the Weighted Average Cost of Capital (WACC) provides insight into a company's profitability relative to its capital costs. Merit Medical Systems' ROIC is 7.56, narrowly eclipsing its WACC of 7.63, suggesting the company is generating adequate returns on its investments.
Conclusion
Merit Medical Systems (MMSI, Financial) presents as modestly undervalued, with a strong financial condition and robust profitability. Its growth outperforms over half of its industry peers, making it an attractive stock for value investors. For an in-depth look at Merit Medical Systems' financials, one can explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
