On Friday, Stifel, a full-service brokerage and investment banking firm, raised its rating on Orthofix (NASDAQ:OFIX) International (NASDAQ:OFIX) stock to Buy from Hold and increased the price target to $24 from $18. The firm cited several factors for the positive outlook on the medical device company, including strong leadership, potential for market growth, and underappreciated earnings power.
Orthofix International has undergone significant changes over the past year, including a shift in the C-suite. Stifel noted that the new management team and refined commercial strategy are expected to translate into value creation for the company. The firm's analysis suggests that if Orthofix meets its financial targets, the current share price may be undervalued.
The firm's revised outlook is based on a model that anticipates Orthofix will achieve above-end market growth of around 6%, with EBITDA margin expansion of 150-200 basis points per year. Stifel also mentioned that a 20% EBITDA margin is reasonable for the company when it reaches scale.
Stifel's positive stance on Orthofix is backed by the belief that the company's profitability, even if only directionally accurate, presents an opportunity for multiple expansions. The firm's commentary emphasized the strength of the new management and the potential for Orthofix's commercial strategy to drive value over several years.
InvestingPro Insights
Recent data from InvestingPro aligns with Stifel's optimistic outlook on Orthofix International (NASDAQ:OFIX). The company's stock has shown remarkable strength, with a 53.63% price total return over the past year and a 20.66% return in the last month alone. This performance has brought the stock price to 93.58% of its 52-week high, suggesting strong momentum.
InvestingPro Tips highlight that Orthofix's liquid assets exceed short-term obligations, indicating a solid financial position that could support the company's growth initiatives. Additionally, the company's revenue growth of 28.94% in the last twelve months demonstrates its ability to expand in the medical device market, aligning with Stifel's projection of above-market growth.
However, investors should note that Orthofix is currently not profitable, with a negative operating income margin of -4.81%. This underscores the importance of the company's strategy to improve profitability, as emphasized in Stifel's analysis.
For readers seeking a more comprehensive analysis, InvestingPro offers additional tips and insights. Currently, there are 5 more InvestingPro Tips available for Orthofix, which could provide further context to the company's financial health and market position.
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