Leading cardiac assist devices maker, Abiomed Inc. (ABMD) recently approved a share repurchase program of up to $15 million of its common stock, thereby leveraging earnings power. The company will finance the program with the available cash.
The company exited its last reported quarter with cash, cash equivalents and short-term marketable securities of $89 million, 46.4% higher than the previous-year quarter. The company had no debt.
However, neither did the company specify the exact timing and duration of the share repurchase program nor did it reveal whether it will buyback shares in the open market or via private negotiations.
The decision reflects the company’s confidence in its fundamentals. At the same time, the share buyback will help it reduce the share count, thereby increasing earnings per share and return on equity. The announcement is not only expected to reinforce shareholders’ confidence but also boost the market value of the outstanding shares.
Massachusetts-based Abiomed is engaged in developing, manufacturing and marketing of medical products designed to assist or replace the pumping function of the failing heart. With a market-cap of $535 million, the company is enjoying strong demand for its Impella products. Impella utilization continues to grow at a healthy pace, as is evident from the increasing number of patients being treated with the device.
However, we are aware of negative sentiments amongst investors regarding the Impella 2.5 investigation process. In this scenario, its competitors, such as Thoratec Corporation (THOR), will likely take advantage of the situation and gain market share. Our ‘Neutral’ recommendation on the stock carries a short-term Zacks #3 Rank (Hold) rating.
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