American Medical Services

Company Description

American Medical Services is a leading independent company focused solely on supplying medical devices to physicians specializing in the treatment of urological disorders. The company manufactures and markets a broad and well-established line of proprietary products directly to urologists, with its principal focus on the three major urological disorders: incontinence, erectile dysfunction and prostate disease.

Earnings Spike

On May 5 American Medical Systems reported first-quarter results that included earnings per share of 25 cents. This was a 67% increase over the same quarter last year and the consensus estimate, both of which were 15 cents. This was the company's seventh consecutive earnings surprise.

Revenue rose 2.7% to $123.6 million, despite the negative impact of a strengthening dollar. Ignoring currency exposure, revenue was up 6.4%.

Estimates Pop

The consensus estimate for 2009 is now 98 cents, up 17 cents since the announcement. Estimates for 2010 are up 16 cents to $1.11. Year-over-year earnings growth for 2009 is forecast to be 40% and another 14% in 2010.

Valuation

AMMD is trading at excellent valuations compared to the industry norm. Shares are exchanging hands at 17.5 times earnings, a relative value to the 44 times that is the industry average. The PEG ratio is 0.9, while its peers are carrying a PEG ratio of 3.0.

The Chart

AMMD has not missed Wall Street expectations in the past 10 quarters, including 7 straight announcements that beat estimates. Take a look at the chart below.