Home Diagnostics Getting Bigger

Home Diagnostics, Inc. (HDIX - Snapshot Report) is small but growing player in the $7 billion worldwide blood glucose monitoring market, estimated to be growing 8% per annum in North America and 17% per annum outside of North America. The company markets its products through 40,000 retail chains and wholesalers, capturing 3.6% of the market.

The company reported second quarter revenue growth of 18.9% year-over-year, slightly higher than our estimates. Barring retail, growth was seen across all the revenue channels. Home Diagnostics' integrated sales approach and co-branding initiatives with retails are paying off, enabling them to capture incremental market share. We expect this trend to continue. The company expects to launch two new products, TRUEresult and TRUEto go, in the second half of 2008.

HDIX is presently trading at a P/E multiple of 21.1x for 2008. The average P/E multiple for the comparables is approximately 22x for 2008. Keeping in view of the company's strong performance and increased expectations for the remaining part of the year, we believe the company should trade at a 10% premium to the average P/E multiple of its comparables. This yields a P/E multiple of approximately 24.2x for 2008, which drives our target price higher to $12.50.

Rajarshi Maulik contributed to the report.

Read the full analyst report on HDIX