Buddy Lyons
Value, long/short equity, contrarian, growth

CareFusion: Increasing ROIC Provides Significant Upside Even With Modest Top-Line Growth

Although CFN has outperformed the market in 2013, we believe it still represents an underappreciated opportunity due to its slow top line growth. Management has shown itself to be disciplined at divesting non-core assets, allocating capital appropriately with regard to acquisitions and buying back almost 10% of the shares just since February 2012. We believe the company can continue to drive higher returns on invested capital (ROIC) with gross margin expansion of 400-500 basis points through FY2016 with mid-single digit top line growth. Based on that our 18-24 month target price is $66 (+78%) with a limited downside potential to $27 (26%).

CareFusion Corporation (NYSE:CFN) is a global medical technology company. The Company operates in two segments: Medical

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