Some Pressure Felt at Hologic

We keep our Hold rating on women's healthcare and diagnostics firm Hologic, Inc. (HOLX - Analyst Report), and believe the shift in the focus for the sale of NovaSure to the office-based market from the hospital market has placed some downward pressure on the company’s growth over the short term.

During the last two years, Hologic’s growth has been driven primarily by acquisitions that expanded its mammography technology and product line. HOLX believes these latest acquisitions allow it to offer customers a broader array of breast imaging and diagnostic products. The acquisition of Cytyc is expected to drive revenue and earnings growth over the near term. However, the company believes that significant reductions in reimbursement rates proposed for the use of several of its products may continue to hurt its sales, which remains a concern.

At its current price of $24.03 per share, HOLX is trading at 17x our 2009 EPS estimate of $1.43, which is at a discount to the group multiple of roughly 18x. Strong growth is expected over the long run from the participation in multiple markets in the U.S. where the majority have high-to-medium growth potential and from the launch of new products and further penetration into the international market.

We believe the stock is appropriately valued at a P/E multiple of roughly 18x 2009 EPS estimate. Our price target is therefore $26.

Read the full analyst report on HOLX