More AngioDynamics Challenges

AngioDynamics Inc.'s (ANGO - Analyst Report) litigation challenges have been replaced by business challenges, which the management will deal with its five-part plan. The results from irreversible electroporation technology initiative could be a future catalyst. However, the stock remains a Hold to reflect the higher execution risk associated with this name.

Since the last quarterly report, AngioDynamics has resolved its litigation issues with VNUS Medical Technologies (VNUS), acquired the U.S. and U.K. assets of Diomed, and completed the acquisition of Oncobionics. The litigation overhang is replaced by a royalty hit to margins. And, the two acquisitions involve integration uncertainty and higher research and development spending.

In response to slowing growth and supply issues, management laid out a plan that focuses on sales, production, and product lifecycles. While some aspects of the plan provided concrete details, others appeared too vague to accurately assess their ability to address the problems the company faces.

At the current price of $13.59, ANGO trades at 2.1x estimated fiscal 2008 revenues of $165 million, a significant discount to the 4.0x 2008 industry average, and a 51% discount to the average of comparables. On our current calendar 2008 EPS estimate of $0.58, the stock trades at a 1.56x P/E/G, at a premium to the average of its comparables at 1.1.

The management mentions nothing about using cash to repurchase stock. Either they are confident they can find better uses for the cash, or, it tells us about the size of the problems the stock faces. The target price moves to $15.50, reflecting the higher execution risk associated with this name.

Read the full analyst report on ANGO

Read the full analyst report on VNUS