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Analyst Blog

On Apr 10, we reaffirmed our long-term Outperform recommendation on Cyberonics Inc. (CYBX - Analyst Report) based on consistent strong results and excellent growth potential. This prominent player in the neuromodulation space carries a Zacks Rank #1 (Strong Buy).

Why Outperform?

Our positive bias on Cyberonics is supported by strong growth in the U.S. on the heels of epilepsy device sales. Moreover, the company also garnered record high revenues in the overseas market on the back of double-digit growth in Europe. The sharpened focus on Japan should support the top line in the coming quarters.

According to recent statistics from U.S. Centers for Disease Control and the National Epilepsy Foundation, there exists a sizeable market opportunity in the U.S. As Cyberonics is a major player in the epilepsy market, we believe that the company will be able to sustain its market-leading growth rate. Given the prevailing underpenetration in the global market, increasing utilization and adoption of Cyberonics’ offerings should drive growth going forward.

Further, Cyberonics’ presence is not limited to the market for epilepsy treatment. The company is currently engaged in discussions with Centers for Medicare & Medicaid Services (CMS) to reconsider reimbursement coverage for VNS Therapy for all treatment-resistant depression (TRD) indications. Additionally, the company is working on VNS Therapy treatment for other indications like Obstructive Sleep Apnea (OSA) and Chronic Heart Failure (CHF). Cyberonics’ effort to strengthen its pipeline improves its growth prospects.

Additionally, Cyberonics continues to reward shareholders with attractive share repurchases. The share repurchase program will allow the company to further leverage earning power going forward.

The revision in the Zacks Consensus Estimates also reflects bullish sentiments for the ongoing and next fiscal. Over the last 60 days, the Zacks Consensus Estimate inched up 5.6% to $1.70 for fiscal 2013, reflecting annualized growth of 33.54%. For fiscal 2014, the Zacks Consensus Estimate improved 5.5% to $1.93, reflecting growth of 13.68%.

Other Stocks to Consider

Cyberonics is not the only medical device stock that warrants a look. Other industry players such as Conceptus Inc. , Cepheid Inc. (CPHD - Analyst Report) and Given Imaging Ltd. , carrying a Zacks Rank #1, are also worth considering.

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