ATS Medical Has Heart

ATS Medical, Inc. (ATSI - Analyst Report) has the goal of becoming the #1 mechanical valve company in the world and has about 20% worldwide market share on a procedure basis. While mechanical heart valves are still growing in international markets, this product is declining in U.S. markets in favor of the tissue valve.

We believe overseas markets will eventually adopt this trend. Expanding the offering of complementary products has fueled ATSI's growth. And, the acquisition of 3F Therapeutics may bring ATSI into the tissue valve market, leveraging its current infrastructure, and turning profitable by the end of fiscal 2009.

At our current estimates, ATS Medical, Inc. trades at 1.8x expected 2009 revenues, a 7% premium to the average of comparables. The move into tissue valve combined with rapid top line growth warrants a premium despite the lack of profitability. At roughly 2.0x 2009 revenues, a 22% premium to the comparables mean, our target price moves to $2.63. Our recommendation remains Hold.

Read the full analyst report on ATSI

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