Gene Gargiulo Upgrades Laserscope to Buy Rating.NEW YORK--(BUSINESS WIRE)--Dec. 26, 1996-- -0- Date: Dec. 24, 1996 Earnings per share 1995A 1996E 1997E Current (.51) .15(a) .38 Previous N/A N/A N/A P/E -- current N/A 38x 15x Book value per share $2.38 Debt % of total capital 0% Shares outstanding: 12.3 mil Market capitalization: $70.77 mil December quarter estimate $0.05 vs. ($0.25) Price: 5 3/4 S&P 500: 751 DJIA: 6522 52 Week range: 1 3/8 - 8 7/16 Avg. daily vol. (2Q96) 45,000 Annual dividend: $0.00 Dividend yield: 0% (a) Before one-time consolidation charge. -0- Investment Summary: Gargiulo Group is upgrading Laserscope(b)(c) from a Hold to a Buy rating. Laserscope designs, manufactures, sells and services an advanced line of medical laser systems and energy delivery devices for the hospital, outpatient surgical center and physician office markets. Through its acquisition of Heraeus Surgical Inc., Laserscope becomes the largest medical (non-ophthalmic) laser company in the world. Heraeus Surgical is a leading manufacturer of LaserSonic Co2 and Nd:YAG lasers and an array of operating room operating room n. Abbr. OR A room equipped for performing surgical operations. systems with $30 million revenue in 1996. In 1995 Laserscope experienced a decline in revenues and an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. due to the further slowdown in the U.S. capital equipment market. Since then Laserscope has reconfigured the company which has resulted in a strong revenue and earnings rebound. Gargiulo Group expects the company's EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. to recover from a loss of $0.51 in FY95 to a profit of $0.15 in FY96 (before one-time consolidation charge), $0.38 in FY97 and a $1.00 in FY99. Short-Term Potential The short-term potential for Laserscope is in the fast growing leg vein and skin resurfacing Skin Resurfacing Definition Skin resurfacing employs a variety of techniques to change the surface texture and appearance of the skin. Common skin resurfacing techniques include chemical peels, dermabrasion, and laser resurfacing. market, through its current product offering, and the fold in technology from Heraeus Surgical. 1. Aura Laser -- New product for spider veins on the leg. The Aura laser system is designed to facilitate surgical and cosmetic procedures in an office or in an outpatient surgical center. Aura features a unique adjustable pulsing mode that allows physicians to match the laser's pulse with thermal relaxation times of various vascular and pigmented lesions. This produces improved clinical results with decreased trauma to adjacent tissue. Aura systems are priced at $50,000 ($70,000 with the scanner) when compared to the other systems from ESC See escape character and escape key. See also ESC/P. ESC - escape Medical and Candela candela (kăndĕ`lə), in weights and measures: see candle. A unit of measurement of the intensity of light. Part of the SI system of measurement, one candela (cd) is the monochromatic radiation of 540THz with a radiant intensity priced at over $130,000. Since its launch in December 1995, Laserscope has already received orders for over 150 systems. 2. Paragon Laser -- For skin resurfacing. The Paragon is a new pulsed CO2 laser which competes very well with Coherent and Sharplan. Skin resurfacing is a $110 million market growing presently at 10% annually, with Coherent at 60% market share and Sharplan at 30%. The COHR COHR Congolese Observatory of Human Rights laser is premium priced and enjoys the strongest reputation in the field. Laserscope strategy is to out market Coherent through the use of two marketing techniques: --Physician seminars combining leg vein treatment and skin resurfacing; --Innovative purchasing plans. At present Heraeus is shipping the Paragon laser for $60,000 ($80,000 with scanner) in the U.S. versus Coherent's price of $125,000. Laserscope hopes to move into the number three position in the skin resurfacing market by leveraging its sales force and unique educational marketing techniques. Mid-Term Opportunity Summary on surgical support systems: 1. These systems include ceiling mounted columns support arms (Mil.) a command in the manual of arms in responce to which the piece is held vertically at the shoulder, with the hammer resting on the left forearm, which is passed horizontally across the body in front; also, the position assumed in response to this command. See also: Support to improve operating room productivity Operating Room Productivity Operating room productivity is the quantity and quality of output as related to the amount of input required. Many institutions believe that productivity (output/input) can be accomplished without sacrificing convenience (access to OR) and efficiency. 2. Smoke evacuation system evacuation system, n a centralized vacuum system connected to each dental operating unit, used to keep the oral cavity clear of water, saliva, blood, and debris, generally operating at a high volume, high velocity, and low pressure. -- A proprietary centralized cen·tral·ize v. cen·tral·ized, cen·tral·iz·ing, cen·tral·iz·es v.tr. 1. To draw into or toward a center; consolidate. 2. vacuum system vacuum system Urology A mechanical system used to facilitate and maintain an erection; an erection erector. Cf Penile implant. for the operating room. This system removes the plum of smoke that is created by a laser or other surgical procedure performed in the operating room. Environmental risk in the operating room is gaining much attention among hospital administrations due to liability concerns. Long-Term Opportunity The alliance with QLT QLT Quadra Logic Technologies QLT Quick Link Text Photo Therapeutics provides tremendous long term growth opportunity for Laserscope. Photodynamic therapy photodynamic therapy n. A type of phototherapy in which a nontoxic light-sensitive compound that has been injected into a patient is exposed selectively to light, whereupon it becomes toxic to targeted malignant and other diseased cells. is an emerging cancer treatment which utilizes light-activated drugs in combination with laser light sources and fiber optic diffusers. This creates highly reactive forms of oxygen which cause the selective destruction of cancerous cells. Marketing clearance for the Laserscope laser system came in conjunction with the FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. approval of laser-activated drug PHOTOFRIN to treat advanced esophageal cancer Esophageal Cancer Definition Esophageal cancer is a malignancy that develops in tissues of the hollow, muscular canal (esophagus) along which food and liquid travel from the throat to the stomach. . Gargiulo Group estimates that the PDT PDT abbr. Pacific Daylight Time PDT Pacific Daylight Time PDT n abbr (US) (= Pacific Daylight Time) → hora de verano del Pacífico PDT laser device market could reach over $100 million from PHOTOFRIN treatment alone by 2001 and Laserscope will be a major player in this market. Conclusion At the current price of $5 3/4 Laserscope is trading at 12 times Fiscal 1997 earnings. Gargiulo Group believes the shares of Laserscope are undervalued Undervalued A stock or other security that is trading below its true value. Notes: The difficulty is knowing what the "true" value actually is. Analysts will usually recommend an undervalued stock with a strong buy rating. . With the acquisition of Heraues Surgical which creates the largest medical laser company in the world, Laserscope will gain more attention from other analysts on the street. (?) price target is $10 to $12 in nine to twelve months and $20 by the end of 1998. -0- Investment Rating: STRONG BUY; expected total annual return of greater than 25% over the next 12-18 months; BUY: expected total annual return in the range of 15-25% over the next 12-18 months; HOLD: stock is fairly valued and should provide returns which approximate returns expected from the broad market over the next 12-18 months. UNATTRACTIVE: stock is overvalued Overvalued A stock whose current price is not justified by the earnings outlook or price/earnings (P/E) ratio and thus, expected to drop in price. Overvaluation may result from an emotional buying spurt, which inflates the market price of the stock or from a deterioration in a based on current and projected E.P.S., cash flow and dividend rate, and should underperform the broad market and the company's peer group over the next 12-18 months; SELL: stock is significantly overvalued based on current and projected F.P.S. cash flow and dividend rate, and should materially underperform the broad market and the company's peer group over the next 12-18 months. Other factors considered in the Investment Rating include the company's risk profile, including earnings predictability, financial position, industry position, technology risk, product risk, and other factors. The required annual return for a specific investment rating will be increased for stocks with greater financial, business, and/or earnings risk. (b) Oscar Gruss & Son Inc. makes a market in this security and may have a long or short position in this security in connection with this activity. (c) Oscar Gruss & Son Inc. managed or co-managed a public or private offering of this issuer, or one of its subsidiaries, within the past three years, and/or provided financial advisory services advisory services advisory services provided to the public, in their capacity as owners and managers of animals, are an important part of veterinary science. They may be provided by government bureaux, by commercial companies who deal in pharmaceuticals or animals or animal to the issuer, or one of its subsidiaries, within the past three years. This report is based upon information which Oscar Gruss & Son Inc. believes to be reliable. However, neither we nor any individual acting on our behalf can guarantee the accuracy or completeness of its contents. It does not purport to contain a complete analysis of every material fact concerning any company, industry or security. We assume that it will be read in conjunction with other available reports and data. Opinions expressed herein are subject to change without notice. No investor can assume that reliance on the views, opinions or recommendations contained herein will produce profitable results. We and/or our employees and affiliates may have positions in securities which are referred to herein and may make purchases or sales thereof while this report is in circulation. Further information is available upon request. Foreign-currency-denominated securities are subject to fluctuations in currency exchange rates that could have a positive or adverse effect on an investor's return upon the conversion and into local currency of dividends or interest received, or proceeds from the sale of such securities. In addition, the value of U.S. dollar-denominated ADRs and the value of U.S. dollar-denominated ordinary shares, or common shares, of foreign issuers can be influenced by fluctuations in currency exchange rates. CONTACT: Gargiulo Group (a division of Oscar Gruss & Son) Justin Tang, 212/952-1220 |
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