Stock

Name (ticker) Student Name

RECOMMENDATION: BUY DATE: 3/9/2016
VOLUME: $3.6M STOCK PRICE: $31.97

EMAIL:
Target Price:
______________
12-Month Performance vs. S&P500
xxx@cornell.edu Date Earnings Price Forecast
P/E
SECTOR:
12/2014 $0.75 $26.82 35.8x
12/2015 $0.96 $29.09 30.3x
Healthcare 12/2016(e) $1.19 $35.7 30.0x

(*) Price on 12/2016 determined using Cap IQ

Industry:
EV/Rev estimate and existing shares outstanding
Cardio Catheter
Manufacturers
Company Description
Vascular Solutions (VASC) designs tools for interventional cardiologists for both therapeutic and diagnostic
purposes. VASC largest and most profitable segment is its cardio catheter division, which accounts for 81% of
revenues and 90% of profits. Companies in the Cardio Catheter Industry make money by selling catheters and
supporting devices to hospitals and healthcare centers to be utilized by cardiovascular surgeons. This industry
has experienced strong growth by offering less invasive products that improve recovery rates.

Investment Thesis
Through investment in R&D (16.1% of revenue compared to the industry median of 14.5%), VASC will
expand its number of products 20% in 2015. VASCs strong patent protection and efficient sales network
provide VASC with a sustainable competitive advantage over its rivals. VASCs most recent 10-K
confirms that VASC is continuing to reinvest its cash flow in new products; VASC continues to grow
both sales and profits (at an accelerating rate). VASC remains undervalued. As the fastest growing
company in its industry and the only company with no debt, VASC represents an attractive acquisition
target for a competitor such as Medtronic (which has lost catheter market share since 2010). Despite a
higher cost of capital due to a higher beta, VASCs intrinsic value has increased as international sales
growth has accelerated. Since costs will remain consistent with revenues, new sales growth will
continue to increase VASCs profits and EPS

Risks and Opportunities

VASC relies on new products to maintain sales growth. Although the company has a pipeline of new
products for the next two years, growth may slow as the pipeline is depleted. VASC continues to lead the
industry with the highest percentage of R&D spending (% of revenue in 2015), but continued growth is
required to support the stocks current PE multiple, which has begun to contract along with Cardio
Catheter micro industry.

Financial Summary
2013 2014 2015 2016(e) 2017(e)
Sales Revenue $90.0 $124.7 $147.2 $163.42 $182.85
EBITDA $19.0 $21.6 $31.7 $33.4 $39.0
ROA 11.1% 10.6% 12.1% 12.7% 14.0%
P/E 26.3x 35.8x 30.3x 30.0x 30.0x
EV/Rev 2.6x 3.4x 4.0x 3.0x 3.0x
Net Debt ($30.8) ($36.5) ($45.8) ($54.9) ($76.0)

Numbers (besides ratios and percentages) in millions.