Haemonetics (HAE) specializes in manufacturing and designing automated blood processing systems. These systems collect and process blood conveniently for patients, utilizing only essential components (such as red blood cells or plasma) while returning the remainder to donors. Haemonetics also designs systems that collect and re-infuse a patient’s own blood during surgery.
The company also provides information management software and provides consultancy services to various hospitals and blood banks. Its primary source of revenue comes from clients based in the United States, but it also has distributors in select countries outside the U.S.
I am bullish on Haemonetics as it has a strong track record of generating growth and profitability and is trading at very attractive valuation multiples relative to its trading history. On top of that, Wall Street analysts are overwhelmingly bullish on the stock, and the average analyst price target implies substantial upside over the next year.
Strengths
HAE continues to register annual incremental growth in revenues across its suite of products. This can be attributed to the strong market demand for NexSys PCS system with Persona technology. As a result, the organization has established a market capitalization of nearly $2.7 billion.
The plasma market for Haemonetics products is looking upbeat, and they continue to register double-digit growth in plasma software sales. With that said, the company’s Blood Center business performance has been noticeably affected due to pandemic-led disruptions. In fact, Blood Center revenues declined by 2% year-to-date (as of the most recent report from November), and the future outlook for these products looks relatively poor.
Recent Results
Haemonetics registered revenue of $239.9 million in Q2 2022, increasing by 14.5% for the same quarter last year. The company’s total revenue for the last 12 months sits at a cozy $933.8 million. Net income growth was 3.85% for the 2021 Fiscal Year but has since dropped off.
Valuation Metrics
HAE stock looks attractively priced at the moment. Its forward enterprise-value-to-EBITDA ratio is relatively low at 13.6 times compared to its historical average of 17 times.
Furthermore, its forward price-to-normalized-earnings ratio is 19.5 times compared to its historical average of 32.6 times. Analysts expect the company to see revenue, EBITDA, and normalized earnings-per-share growth in 2022 of 4.1%, 5%, and 11.3%, respectively.
Wall Street’s Take
According to Wall Street analysts, HAE earned a Moderate Buy consensus rating based on four Buys and two Hold ratings assigned in the past three months. Additionally, the average Haemonetics price target of $71 puts the upside potential at 35%.
Summary and Conclusions
Haemonetics has a demonstrated track record of generating solid growth and profitability. Its products and innovative capabilities offer value in a healthcare industry that is desperately looking for improved quality and cost efficiency.
Furthermore, Wall Street analysts are quite bullish on the stock as the average price target implies substantial upside over the next year, which is very possible. Last but not least, the valuation multiples imply that the stock is undervalued.
As a result, it looks like it might be a good time to add shares of the stock.
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