Small market caps, attractive growth prospects and idiosyncratic product cycles among diagnostics companies can lead to valuation volatility while also creating attractive M&A opportunities.
The Analyst
Goldman Sachs analyst Patrick Donnelly initiated coverage on the diagnostics sector with a Neutral sector view while assigning Qiagen NV QGEN a Buy rating.
The Thesis
Qiagen is "a premium diagnostics platform with strategic appeal that should benefit as new product cycles continue to drive growth against abating HPV headwinds," Donnelly said in a note.
The analyst models approximately 7-percent organic growth through 2020, citing a “clear path to an inflection in growth” as the company works off pricing headwinds from HPV diagnostics products.
Donnelly also assigned Qiagen an M&A value of "1," indicating the company may be an attractive takeout candidate given its scale, growth profile and end market breadth.
“We believe it would be an attractive strategic asset for acquirers looking for a growth-accretive transaction,” said Donnelly, adding that the company’s valuation is reasonable relative to its growth profile.
Price Action
At the time of publication, Qiagen shares were trading down 0.78 percent at $34.45.
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