NovaMed Outlook Impresses

NovaMed, Inc. (NOVA - Snapshot Report) is an emerging healthcare services company engaged in the operation of ambulatory surgery centers (ASCs) and the provision of optical products and services to eye-care professionals. Headquartered in Chicago, the company was founded in 1995 and floated in 1999.

The company reported better-than-expected 1Q08 income from continuing operations of $2.136M, up 39.3% y/y, compared with $1.533M in 1Q07. Operating margin improvement coupled with solid cash flow from operations more than offset the slightly lower rate of same-facility revenue growth (3% versus management's target of 5%) and underpins our continuing positive view of the company.

We retain our Buy recommendation at current levels. We have valued NOVA on a forward price/earnings (P/E) basis, as well as a comparison to similar firms in the healthcare facilities sector. We believe the current business model is sound, and represents an attractive value proposition to potential commercial healthcare partners. Our $7 price target is derived using a 20 x P/E multiple and FY08 EPS estimate of $0.35.

Read the full analyst report on NOVA.