Globus Medical Inc (NYSE:GMED) has been attracting investment from many famous investors including Steven Cohen, Joel Greenblatt, and Chuck Royce. Since the beginning of the year, it has experienced a sweet rise of nearly 46% from around $11 per share to more than $15 per share. Is the run up now over for this stock? Or would it continue to march higher? Let’s take a closer look.
Consistent growth in top and bottom lines
Globus Medical Inc (NYSE:GMED) is the developer of more than 110 products for the treatment of patients with spine disorders, with two main product categories: Innovative Fusion products and Disruptive Technology products. Most of its revenue, $238.7 million, or 61.8% of the total 2012 revenue, was generated from the the Innovative Fusion product category, while the Disruptive Technology product category contributed nearly $147.3 million in sales in 2012. The majority of its sales, $355.6 million, were derived in the U.S.
In the past three years, Globus Medical Inc (NYSE:GMED) has experienced consistent growth in both top and bottom lines. Revenue has increased from $288 million in 2010 to $386 million in 2012 while net income has risen from $54 million to $74 million during the same period. In 2012, the company generated $77 million in operating cash flow and $52 million in free cash flow. What I like about the company is its strong, debt-free balance sheet. As of March 2013, it had $408 million in equity, $162 million in cash, and no debt.
The cheapest valued company among its peers
At $15.30 per share, Globus Medical Inc (NYSE:GMED) is worth nearly $1.4 billion. The market values the company at 9.6 times EV/EBITDA. Compared to its peers NuVasive, Inc. (NASDAQ:NUVA) and Stryker Corporation (NYSE:SYK), it is the cheapest valued among the three.
NuVasive, Inc. (NASDAQ:NUVA) is trading at around $22.20 per share with a total market cap of $982 million. It has a much higher EV multiple of 11.65. NuVasive, Inc. (NASDAQ:NUVA) has kept expanding its footprint via acquisitions. In the beginning of May, it announced that it has acquired ANC, a spine implant maker in Dayton, Ohio. This acquisition could be considered a vertical acquisition, as ANC has been one of the company’s implant suppliers. The total purchase price is around $4.5 million.
This vertical integration is expected to bring significant synergy for NuVasive, driving the company’s long-term profitability. Alex Lukianov, the company’s Chairman and CEO said: “Bringing portions of our manufacturing in house is a key element of our ongoing commitment to improve operating profitability as we grow toward $1 billion in revenue and beyond. With Speed of Innovation as a fundamental cornerstone of our success, the acquisition will reduce the time from the concept of a new idea to ultimate market introduction, enabling development and manufacturing to work seamlessly in launching our innovative solutions.”