Vital Images Looks Longer Term

Vital Images, Inc. (VTAL - Snapshot Report) develops medical software for use primarily in clinical diagnosis, disease screening and therapy planning. The company's software applies proprietary computer graphics and image processing technologies to a wide variety of data supplied by computed tomography (CT), magnetic resonance (MR), and positron emission tomography (PET) scanners.

After this year, the company expects to once again generate strong growth by capturing a growing share of customers in an expanding worldwide market for three-dimensional medical imaging products. However, the company's ability to maintain high gross margins is at risk from its dependence on Toshiba, which is expected to increase.

The company's sound cash position is being utilized for stock repurchases and may lead to an acquisition over the long-term. We believe VTAL is appropriately valued at roughly a group premium of 3.3x 2009 revenue estimate. Our price target moves to $17.50, and our Hold rating is maintained.

Read the full analyst report on VTAL