JMP Securities initiated coverage on Enovis Corporation (NYSE:ENOV), a medical technology company focusing on orthopedics.
The analyst adds that the company sells a broad portfolio of products, many of which were added via selective acquisitions (around 20 over the last 4.5 years). The analyst views M&A as a core competency.
The company's product offerings span large joint reconstruction implants, extremity solutions, and various prevention and recovery franchises.
These lines enable comprehensive care, addressing patient needs before, during, and after injury or trauma. This broad portfolio provides the scale to compete with major MedTech players and unlocks extensive opportunities for brand expansion.
Earlier this year, Enovis completed the acquisition of LimaCorporate S.p.A, a private global orthopedic company focused on restoring motion via a portfolio of implant solutions, for an enterprise value of approximately 800 million euros (around $850 million).
This second-largest deal in the company's history bodes well for the company.
Management noted that channel integration was 100% complete in the U.S. and 70% outside the U.S., revenues were tracking slightly better than original guidance, and cost synergies of over $40 million in year three remain intact, with $10-$15 million accruing this year.
In the second quarter, Enovis reported sales of $525 million, up 23% on a reported basis and 5% on a Comparable sales basis year-over-year.
"We continue to execute against our plan for the year and are off to a great start integrating our transformational Lima acquisition," said Matt Trerotola, CEO of Enovis.
The analyst views the LimaCorporate deal as largely derisked. Peak dis-synergy of ~$10 million occurred in the second quarter of 2024, which is now in the rearview mirror.
JMP analyst initiates with a Market Outperform rating and a price target of $62.
Despite a roughly 25% year-to-date decline in the stock and its current valuation at approximately 12x 2026 EPS estimates, JMP Securities says the market has yet to fully recognize the advantages of the acquisition and the progress made in its integration.
Given these factors, the analyst sees Enovis as undervalued compared to its mid-cap and orthopedic peers and deserving of a higher P/E multiple, especially with upcoming revenue and earnings growth catalysts.
Price Action: ENOV stock is down 2.02% at $40.02 at the last check on Thursday.
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