NovaMed Outlook Impresses

NovaMed, Inc. (NOVA) 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.

Read the full analyst report on NOVA