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Enzymotec (NASDAQ:ENZY) -- pronounced "Enzyme-o-tec" -- is a nutritional ingredients and medical foods company focused on bio-functional lipid-based compounds. Areas of focus include infant nutrition and Omega-3 fatty acid supplements.

Founded in Israel in 1998, the $600 million company's products are marketed to global consumer companies in 30 countries. Besides their core products, Enzymotec also maintains a strong clinical trial portfolio and is pursuing medical foods opportunities through the leveraging of its lipids-related capabilities.

ENZY went public last fall and just closed a 5.4 million secondary share offering last week that was mostly soaked up by two hedge funds, Paulson & Co. and Visium Asset Management.

Analysts were raising estimates and price targets after the company's strong Q4 report in February, which beat EPS expectations by 67%. Becoming a Zacks #1 Rank, the shares then rallied up to $29.75 but sold off on the secondary offering, which was priced at $28.

Early Stage Growth

According to analysts at Wedbush, "Enzymotec, with its proprietary technology in lipids and expanding global distribution platform, will continue to gain market share within three fast-growing industry segments of nutritional foods & supplements: krill oil, infant nutrition, and medical foods."

They believe that given the company's high growth prospects, ENZY should trade at a 20% premium to its peer group average on a PEG ratio basis. "This translates to a 1.6x 2014 PEG ratio, thus generating our 12-month price target of $33."

Expertise = Target

I bought shares of Enzymotec recently for the Follow The Money Portfolio after I saw those two hedge funds pick up over 5 million shares between them.

I also thought it was an attractive growth opportunity in health-focused foods. With their proprietary R&D in lipids and expanding global customer base, I see ENZY as a potentially attractive take-over target for large pharmaceutical or nutrition product companies.

As always, this kind of speculation is just that and isn't sufficient to build an investment thesis around. But when valuing a company, institutional investors often model not just a future stream of cash flows, but also "what will the other guy pay to own that stream or its technology basis?"

Here's the view from Wells Fargo last month...

"Enzymotec offers investors a robust multi-year growth opportunity. Leveraging attractive categories including infant nutrition and health & wellness, we forecast 3-year CAGRS of 55% for net sales and 70% for EBITDA through 2015, a result of core category growth and company-specific innovation and distribution."

The analysts come up with a valuation range of $32 to $34 based on 27X 2015 EPS of $1.22, representing over 40% year-over-year growth.

In a market loaded with speculative small cap stocks that are void of real earnings growth, ENZY offers an established business niche and solid potential. Clearly, this is what Paulson & Co. and Visium saw too.

Disclosure: I own shares of ENZY for Zacks Follow The Money Portfolio.

Source: Zacks' Bull Of The Day Enzymotec