Stephen Simpson, CFA
Long only, growth at reasonable price, value, research analyst

Expectations For Merit Medical Still Seem A Little Low

"Buy the stocks of good companies" sounds like good advice, but the reality can get really tricky when it comes down to issues like valuation. Merit Medical (NASDAQ:MMSI) is a good case in point. This company makes most of its money in markets that aren't really seen as growth opportunities and hasn't generated double-digit operating margins in quite some time. Yet, even a very modest 2x multiple to 2014 revenue suggests at least 10% upside, and the company may well see meaningful growth from products designed for radial access.

I'm inclined to be positive on Merit Medical, but the low margins, lack of free cash flow generation, and weak returns on invested capital are all reasons for pause....

Join Seeking Alpha PRO to read this archived article and 11,574 other archived articles
FREESA PRO MEMBERS
IDEA GENERATORXExclusive access to 10 PRO ideas every day
INVESTING IDEAS LIBRARYXExclusive access to PRO library of more than 15,000 ideas
SECTOR EXPERT NETWORKXExclusive access to all sector experts for direct consultation
PERFORMANCE TRACKINGXTrack performance of all PRO stock ideas
PROFESSIONAL TOOLSXProfessional Idea Filters to zero-in based on industry, market cap and more
"In just the first month of using PRO, I used it to generate two ideas which were actionable for me. As a result of these two positions, I have earned more than 20 times the annual subscription costs for PRO."Michael Yagemann, Greenbridge Capital
"I am pleasantly surprised with the scope of small and mid-cap coverage PRO offers. You can't find that any where else."Patrick Rice, Mainstay Capital Management
You may cancel at any time for any reason, and receive a prompt refund for membership on months paid and not used (max. 6 months). Details