Sonic Innovations a Sound Buy

Sonic Innovations, Inc. (SNCI) designs, develops, manufactures and markets advanced digital hearing aids, designed to provide the highest levels of satisfaction for hearing-impaired consumers. Capitalizing on its advanced understanding of human hearing, the company has developed patented digital signal processing (DSP) technologies, and embedded them into the smallest single-chip DSP platform ever installed in a hearing aid.

SNCI reported Q3 EPS that beat our estimate by $0.08 on sales that exceeded our forecast. We increased our FY08 sales and EPS estimates. We lowered our FY09 sales estimate but increased our FY09 EPS estimate. The company finally gave up on Tympany and the referral concept and instead has expanded its distribution relationships and is acquiring practices and opening new clinics to help drive meaningful sales growth from new product launches.

Sonic Innovations has been consolidating operations in Europe to reduce operating costs and to focus resources on markets that offer the greatest profitability. Our price target is based on a price-to-sales multiple of roughly 0.6x FY09 sales estimate.

Read the full analyst report on SNCI