Given Imaging Paints a Speculative Picture

by: Donald Johnson

Given Imaging (GIVN) continues to be a very speculative stock. What makes it speculative is that it is developing a new generation of its PillCam, a small gastrointestinal device that patients swallow. The device is used instead of a traditional invasive colonoscopy. It examines more of the colon than a colonoscopy, but it doesn't do biopsies, which means that when the PillCam detects problems, a colonoscopy is still needed.

New devices take time to develop and need even more time to win acceptance by physicians, health insurers and government health plans like Medicare and Medicaid. Thus, Given's newest products aren't expected to reach market for another two to four years. Governments have been slow to accept the current PillCam, although many U.S. insurers do.

Another question is whether a major device-maker's attempt to emulate Given's products will produce superior devices and, in that case, if gastroenterologists will stick with their favorite brand. Since I last wrote about Given about 10 months ago, the stock has dropped to $8.18 from about $16.95 a share. Its charts remain quite bearish, although its point and figure chart has a bullish price objective of $17.50.

Debbie S. Wang, who follows Given for Morningstar.com, is bullish on the company's long-term (two to four years) prospects. She estimates the company's fair value is between $11 and $29 a share and gives the stock her firm's top rating, five stars. By her reckoning, the stock is a buy. Given has no debt and about $67 million in cash. Its price earnings ratio is a rather rich 15.75. It is selling for 2.18 times sales and its price to cash flow ratio is a rich 22.42, according to Morningstar. Thus, Given remains a very speculative play, one that is worth watching. But I wouldn't buy it until its technicals look better. More information about GIVN is here.

Disclosure: I don't own GIVN.