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LeMaitre Vascular- Heart-Felt Opportunity

LeMaitre Vascular (LMAT), based in Massachusetts, is a provider of devices, implants and services for the treatment of peripheral vascular disease, a condition that affects more than 200 million people worldwide, notes Doug Gerlach, editor of SmallCap Informer.

The company develops, manufactures and markets disposable and implantable vascular devices to address the needs of vascular surgeons.

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LeMaitre’s diversified product portfolio consists of devices used in arteries and veins outside of the heart, such as shunts, catheters, clips, glue, injectors, patches, and grafts.

It offers the #1 or #2 products by market share in 12 of 15 vascular product lines, and in total controls about 20% of the approximate $5 billion peripheral vascular market. The company sells to 4,500 hospitals worldwide.

Revenues have grown at an average annual rate of 8.3%, but revenue growth has been accelerating and was 13.1% from fiscal 2016 to fiscal 2018. EPS have been increasing at a faster pace as well, growing more than 50% annually since 2014.

In the 21 years since 1998, LeMaitre has made 21 acquisitions. In the 21 years since 1998, LeMaitre has made 21 acquisitions. In 2018, the company acquired the assets of Cardial, a subsidiary of Becton, Dickinson & Co. located in France and the vascular clot management business of California-based Applied Medical Resources Corp.

The total purchase price for the Cardial busines was €2.0 million and $14.2 million for the clot management business. These two purchases expand LeMaitre’s international presence and adds surgical glue and latex-free over-the-wire embolectomy catheters to its offerings, and began contributing to sales in 4Q 2018.

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Historically, LeMaitre has operated in lower-rivalry niche product segments, such as in the markets for biologic vascular patches and valvulotome devices where the number of competitors has historically been limited.

We are modeling 9% average sales growth and 12% average EPS growth through 2022, providing a margin of safety if results meet management’s guidance.

LeMaitre Vascular’s pre-tax profit margins have been expanding impressively. In 2017, the margins reached a decade-high 20.9%. The first three quarters of the fiscal year have seen margins remain above 18.9%. These levels compare quite favorably to peers. Continued margin expansion is expected to help EPS grow faster than sales.

LMAT’s current P/E is 22.6, which is 67% of the average five-year P/E, and the recent stock price is less than $2 above its 52-week low price of $21.79. Based on a future high P/E of 25, the stock could reach $46 by 2022.

On the downside, a low P/E of 16 (a level not seen since 2010) and flatlined EPS equate to a low price of $16.60. An average yield of 1.37% helps boost the average annual return to 15.6%, with a 3.3-to-1 upside/downside ratio.

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