Conceptus, Inc. (CPTS) Seems To Be Expensively Valued

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Conceptus seems to be expensively valued

At $31 per share, Conceptusis worth around $1.1 billion. The offer values Conceptus quite expensively at 37.3 times EV/EBITDA. Compared to its bigger peer, Hologic, Inc. (NASDAQ:HOLX), Conceptus has a much higher valuation. Hologic, Inc. (NASDAQ:HOLX) is the leader in developing and manufacturing premium diagnostics products, medical imaging systems and other surgical products for women healthcare needs including Breast Health, Diagnostics, GYN Surgical and Skeletal Health. Most of its revenue, $707.5 million, or 35% of the total 2012 revenue, were generated from the Diagnostics’ products while Breast Health products ranked second, with $572.5 million in 2012 revenue. In the middle of March, the company announced an impressive result of KLAS Research’s independent survey of Hologic, Inc. (NASDAQ:HOLX) 3D mammography.

People see “significant reduction in false-positive callbacks, an increase in new patients, and even workflow improvements.” From Peter Soltani, Hologic, Inc. (NASDAQ:HOLX)’s Senior VP and General Manager of Women’s Health:

The ability to achieve a positive return on investment, while providing a leading-edge technology with demonstrated clinical advantages is a win-win situation for everyone. The recently published Oslo Tomosynthesis Screening Trial showed that screening with Hologic’s 3D mammography finds 40 percent more invasive cancers than traditional mammography alone. It is encouraging to have independent data from this report to confirm the positive business impact.”

Hologic, Inc. (NASDAQ:HOLX) is trading at around $20 per share, with a total market cap of $5.4 billion. It has a much cheaper valuation than Conceptus, at only 13.5 times EV/EBITDA. The acquirer, Bayer AG (ADR) (NASDAQOTH:BAYRY), has the cheapest valuation of the trio. At $79 per share, Bayer AG (ADR) (NASDAQOTH:BAYRY) is worth around $65.4 billion on the market. The market values Bayer AG (ADR) (NASDAQOTH:BAYRY) at only 9.11 times EV/EBITDA. In terms of profitability, BaBayer AG (ADR) (NASDAQOTH:BAYRY) yer is the most profitable company with more than 13% return on equity. While Hologic, Inc. (NASDAQ:HOLX) generated a negative return on equity of 3%, Conceptus’s return on equity stayed low at 3.27%.

My Foolish take

Bayer seems to place Conceptus at a very high valuation level. However, it is a good move for the company to penetrate into the U.S. healthcare market. I personally think that the German healthcare giant will be a good long-term investment, due to its consistent profitability and a reasonable single digit valuation.

The article A Strategic Healthcare Deal With an Expensive Price Tag originally appeared on Fool.com and is written by Anh HOANG.

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