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Piper Jaffray starts Novadaq at overweight

April 16, 2012 by · Leave a Comment 

Piper Jaffray has initiated coverage of Novadaq Technologies (NASDAQ:NVDQ; TSX:NDQ) with an “overweight” rating and $8 price target based on an enterprise value to sales multiple of 8.5 times estimated 2013 sales of $39 million.

Matt Miksic

“Novadaq is an attractive advanced surgical technology growth story, driven by penetration of the company’s proprietary tissue imaging technology across a wide array of applications, totaling nearly $2 billion in revenue potential,” writes analyst Matt Miksic.

“Expected compound annual growth of 45% over the next four years is driven by expanding robotic and wound care indications and the company’s direct sales of its Pinpoint MIS fluorescence imaging system,” he added.

Mr. Miksic figures Novadaq’s strategy of expanding SPY imaging applications for other indications such as vascular, diabetic foot ulcer, limb salvage, and wound imaging “helps broaden the company’s customer base and reinforces growth.”

He said Novadaq is on track to reach cash flow breakeven this year, given the company’s rapid growth and profitable revenue model for systems and consumables.

“The investment in a modest direct sales force for MIS/Pinpoint will push that off to mid-year 2013,” he said, adding that the company has effectively managed the P&L to a very low cash burn rate on its current base of business, “which we view as a positive for the stock.”

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