Merit Medical Systems Had A Solid Q3, But This Analyst Has Lowered The Price Target On The Stock

Needham analyst Mike Matson reiterated the Buy rating on Merit Medical Systems, Inc. MMSI, lowering the price target to $81 from $96.

Merit Medical delivered a street-beating performance in Q3 2023, where reported revenue of $315.2 million was up 9.8% year-over-year.

According to the analyst, Merit Medical is undergoing a turnaround after encountering challenges with several acquisitions and seeing its operating margin decline. 

Matson projects the revenue growth to return to the mid-single digits or better and EPS growth to return to 15%+.

Management is implementing a detailed plan to drive its operating margin higher and improve cash flow, with a target of reaching an 18-21% operating margin in 2023, the analyst adds.

The analyst raised 2023E and 2024E revenue estimates to $1.250 billion from $1.237 billion and to $1.340 billion from $1.327 billion, respectively. Matson also increased 2023E and 2024E EPS estimates to $2.96 from $2.91 and to $3.25 from $3.23, respectively.

However, the analyst lowered the price target to reflect a downward revaluation of the company's peers.

The analyst's 12-month price target for Merit Medical of $81 is based on a multiple of 25.0x of the analyst's new 2024E EPS estimate. 

This multiple is above Merit Medical's small/mid-cap GARP medical device peers (trading at a median 2023E P/E of 21.4x) and its small/mid-cap cardiovascular peers (trading at a median 2023E P/E of 21.4x) due to its higher revenue and EPS growth.

Price Action: MMSI shares are trading higher by 7.32% to $68.14 on the last check Friday.