Sonic Innovations Attractively Priced

Sonic Innovations (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 Q4 EPS that were lower than our estimate by a penny on sales that were below our forecast. We lowered our FY09 sales and EPS estimates. We initiated FY10 sales and EPS estimates.

The company has expanded its distribution relationships and has been acquiring practices and opening new clinics. SNCI expects to launch more products in Q209/Q409. SNCI consolidated its operations in Europe to reduce operating costs and to focus resources on markets that offer the
greatest profitability.

Our price target of $2.00 per share is based on a price-to-sales multiple of roughly 0.6x FY09 sales estimate.