JMP Securities has taken a bullish stance on Enovis Corporation (ENOV), a leading medical technology company specializing in orthopedics, initiating coverage with a ‘Market Outperform’ rating and a price target of $62. The analyst highlights Enovis’s strategic approach to growth through acquisitions, having completed around 20 acquisitions in the past 4.5 years. This acquisition strategy, considered a core competency by the analyst, has enabled Enovis to build a comprehensive portfolio of products spanning large joint reconstruction implants, extremity solutions, and prevention and recovery franchises. This broad range of offerings allows Enovis to provide comprehensive care, addressing patient needs throughout their orthopedic journey, from pre-injury to post-recovery. The scale of this product portfolio positions Enovis to compete effectively with major MedTech players and unlocks significant opportunities for brand expansion.
Enovis’s recent acquisition of LimaCorporate S.p.A, a private global orthopedic company focused on restoring motion, for an enterprise value of approximately €800 million (around $850 million), is a key factor in JMP’s bullish outlook. This acquisition, the second largest in Enovis’s history, has already demonstrated positive results. Management has reported that channel integration is complete in the U.S. and 70% complete outside the U.S., with revenue tracking slightly ahead of initial guidance. Additionally, cost synergies of over $40 million in year three remain intact, with $10-$15 million expected to accrue this year. Enovis’s second-quarter results further reinforce this positive trajectory, with sales reaching $525 million, representing a 23% increase on a reported basis and a 5% increase on a comparable sales basis year-over-year.
Matt Trerotola, CEO of Enovis, expressed confidence in the company’s continued execution, stating, “We continue to execute against our plan for the year and are off to a great start integrating our transformational Lima acquisition.” JMP views the LimaCorporate deal as largely derisked, with the peak dis-synergy of ~$10 million occurring in the second quarter of 2024 now in the rearview mirror. Despite a significant year-to-date decline in the stock (approximately 25%) and its current valuation at approximately 12x 2026 EPS estimates, JMP Securities believes the market has yet to fully recognize the advantages of the Lima acquisition and the progress made in its integration.
The analyst sees Enovis as undervalued compared to its mid-cap and orthopedic peers, arguing that the company deserves a higher P/E multiple, especially considering upcoming revenue and earnings growth catalysts. This bullish outlook is based on the company’s successful execution of its acquisition strategy, the positive integration of LimaCorporate, and the expectation of continued growth.
ENOV stock was down 2.02% at $40.02 at the last check on Thursday.
