BTIG Believes Orthofix (NASDAQ: OFIX) Won’t Stop Here

By Ryan Adsit

BTIG analyst Ryan Zimmerman reiterated a Buy rating on Orthofix (NASDAQ: OFIX) on June 20 and set a price target of $52. The company’s shares closed last Friday at $46.60, close to its 52-week high of $48.25.

Zimmerman said:

“Look a Little Further Out; Initiate Buy and $52 PT Orthofix operates in numerous segments of orthopedics. Its primary franchise, bone stimulation (BioStim) for the treatment of hard to heal fractures and spinal fusion, has been growing nicely and should continue to grow based on new products, a professional society recommendation, and a large market opportunity. That said, investors have shied away from OFIX in large part due to historical issues related to restatements, SEC investigations and concerns that the FDA may upend the bone stimulation market. We believe the concerns are overblown and the noise aside, OFIX has strong gross margins and generates sizable EBITDA which will result in strong free cash flow in the coming quarters.   BioStim should continue to grow above market: OFIX’s BioStim segment grew 7% Y/Y in FY16 (9% in 1Q17), while the market grows in the low single digits. We believe BioStim continues to both grow the market (which we estimate to be a $1.2B opportunity) and take share. Add new products and a recommendation from the North American Spine Society and we believe penetration in spinal fusion continues to grow as OFIX has the only cervical stimulation product on the market.   Gross margins are within the top 10%-15% of MedTech: OFIX’s gross margins of 78%-79% are well above industry average and have remained strong for multiple quarters. Strong GMs provide for sizable EBITDA returns in the coming quarters as adjustments and one-time charges are cleaned up.”

Orthofix has an analyst consensus of Moderate Buy, with a price target consensus of $50.

Based on Orthofix’s latest earnings report for the quarter ending March 31, the company posted quarterly revenue of $103 million and GAAP net loss of $2.65 million. In comparison, last year the company earned revenue of $98.68 million and had a net profit of $3.89 million.

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Orthofix International NV is engaged in the research, development, and market of orthopedic solutions. It operates through the following business segments: BioStim, Biologics, Extremity Fixation, and Spine Fixation. The BioStim segment produces and sells devices for bone fusion enhancement in cervical and lumbar spine through the pulsed electromagnetic technology. The Biologics segment includes regenerative products. The Extremity Fixation segment manufactures and distributes orthopedic products for fracture repair, deformity correction, and bone reconstruction. The Spine Fixation segment develops and sells implant products for spine surgeries. The company was founded on October 19, 1987 and is headquartered in Willemstad, Netherlands.,001WWD-E