At the current price of $54, what is the market’s view of Globus Medical’s future operating performance? To achieve average annual stock market performance of 9.0% over the next 6 years, Globus Medical shares will need to reach $91. To achieve Upper quartile performance, Globus Medical’s stock price will need to reach $108 by 2029.
Executive Summary
- Globus Medical’s important characteristics: high expected growth, low stability, very low profitability, and low financial strength. Growth is a big positive influence on Globus Medical’s valuation while Risk Profile is a big negative influence.
- Very low valuation, below market shareholder returns. Current valuation levels are very low relative to the Globus Medical Peer Group. Recent market returns have underperformed the Globus Medical Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, Globus Medical shares should reach a level of $328 by 2029 — an 34.9% per year total shareholder return. A 2029 stock price of $91 would reflect median performance and a price of $108 would be required to reach upper quartile performance.
- Growth has been Globus Medical’s biggest valuation strength. Historical growth has been very high relative to the Globus Medical Peer Group and forecasted growth is relatively very high. Equity Growth, EPS Growth, Asset Growth, and Revenue Growth have all been superior. These factors have buoyed market perceptions of Globus Medical. Globus Medical’s historical income statement growth and balance sheet growth have diverged. Revenue growth has fallen short of asset growth; earnings growth has paralleled equity growth and return on equity has been stable. Globus Medical’s consensus growth expectations are higher than historical growth.
- Asset Turnover, Pretax ROA, Return on Equity, and Pretax Margin are all group lagging. These factors have negatively affected market perceptions of Globus Medical. The company has very low cash and will have to work to generate attractive investments and improve valuation.
- Globus Medical’s risk profile is very unfavorable. Overall variability has been only average with only average revenue variability, very high E.P.S. variability, Financial Strength is very low and earnings’ expectations are only average. The debt/capital ratio has risen very significantly.
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