Cantel Medical - Aggressive Growth
December 31 2012 - 12:30AM
Zacks
Shares of
Cantel Medical (CMN) soared to a 52-week high of
$30.25 on December 12, shortly after the company reported its third
straight quarter with a positive earnings surprise. This Zacks #1
Rank (Strong Buy) developer of infection prevention and control
products has potential for a growth investor, given its long-term
expected sales growth rate of 10.9%, its robust portfolio, several
strategic initiatives and an uptrend in earnings estimates.
Impressive Q1
Cantel Medical kicked off fiscal 2013 with a strong
first-quarter report on December 6. Earnings per share of 35 cents
beat the Zacks Consensus Estimate by 25% and jumped year over year
by 52.2%.
Total revenues of $99.7 million were almost in line with the
Zacks Consensus Estimate and displayed a healthy 6.9%
year-over-year growth. Despite some sales disruptions due to
Hurricane Sandy, the sales growth came from a balanced performance
across the three major business segments.
Cantel Medical identified three major profit boosters that
should further drive performance in the upcoming quarters. The
foremost of its successful strategies was to develop and promote
higher-margin products in all of its major businesses. This
positive mix shift resulted in a huge 320 basis point (bps)
expansion in the company’s gross margin to 43.9% during the last
reported quarter. The other two profit accelerators were the
successful integration of acquired businesses and disciplined
expense control.
Earnings Estimates Moving Up
The Zacks Consensus Estimate for fiscal 2013 has increased 15.6%
over the past 30 days to $1.48 per share, as both estimates were
revised upward. For fiscal 2014, the Zacks Consensus Estimate has
gained 10.0% to $1.65 over the same time frame, as both estimates
again headed higher. This indicates year-over-year growth of about
11.86%.
Attractive Valuation
Cantel Medical is currently trading at a forward P/E of 20.05x,
a 1.6% discount to the peer group average of 22.35x. The
price-to-book ratio is 2.82x, a 15.6% discount to the peer group
average of 3.26x. Similarly the price-to-free-cash-flow ratio looks
attractive at 17.26x, a roughly 14.3% discount to the peer group
average of 19.73x.
Chart Shows Strength
A quick look at the chart shows what aggressive investors are
really looking for. Cantel Medical’s price performance has been
reasonably strong with the chart showing a rising trend (except a
few minor pull backs). Particularly, following the release of its
fiscal first-quarter results, the stock showed a steep uptrend and
is currently trading above both its 50- and 200-day averages.
![](http://www.zacks.com/images/upload_dir/1356726063.jpg)
Headquartered in Little Falls, New Jersey, Cantel Medical
engages in the development, manufacture, and distribution of
infection prevention and control products and services in the
healthcare market. The company’s major products include water
purification equipment, sterilants, disinfectants and cleaners,
specialized medical device reprocessing systems for endoscopy and
renal dialysis, and disposable infection control products primarily
for dental and GI endoscopy markets. The company has a market
capitalization of $777.8 million.
Other Zacks #1 Rank (Strong Buy) medical devices stocks include
Thoratec (THOR) and Merit Medical Systems (MMSI).
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