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GMED

Globus Medical NYSE:GMED Stock Report

Last Price

US$58.35

Market Cap

US$5.8b

7D

-3.4%

1Y

-27.5%

Updated

26 Sep, 2022

Data

Company Financials +
GMED fundamental analysis
Snowflake Score
Valuation2/6
Future Growth2/6
Past Performance2/6
Financial Health6/6
Dividends0/6

GMED Stock Overview

Globus Medical, Inc., a medical device company, develops and commercializes healthcare solutions for patients with musculoskeletal disorders in the United States and internationally.

Rewards

Earnings are forecast to grow 10.72% per year

Analysts in good agreement that stock price will rise by 22.4%

Risk Analysis

No risks detected for GMED from our risk checks.

Globus Medical, Inc. Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Globus Medical
Historical stock prices
Current Share PriceUS$58.35
52 Week HighUS$81.78
52 Week LowUS$52.60
Beta1.11
1 Month Change-3.30%
3 Month Change1.39%
1 Year Change-27.46%
3 Year Change14.14%
5 Year Change92.07%
Change since IPO332.22%

Recent News & Updates

Sep 02

Globus Medical: Compelling Long-Term Value On Offer, Buy Thesis Intact

Summary Globus Medical continues to offer compelling long-term value with its expertise in spinal and musculoskeletal surgery. With its entry into robotics and emerging technologies continuing to ramp up, there is now a wider offering with greater exposure in GMED. After making necessary adjustments to GAAP earnings, corporate value is tremendously appealing in both the investment and earnings piles. Shares therefore look attractively priced post-adjustment, presenting with an asymmetry to the upside that other investors are overlooking. With this in mind, we price GMED at $110 and seek 70% upside potential from today's market capitalization. Investment summary Globus Medical, Inc. (GMED) continues to offer compelling long-term value in both its niche characteristics and return on investment differentials to peers in the space. Whilst it operates in a capital-intensive environment, its return on invested capital easily surpasses the WACC hurdle and the growth in investment each year. The company is a long-term cash compounder in a defensible industry. With shares traded down since May/June, they are well priced at current valuations, with plenty of long-term upside capture on offer. We rate GMED a buy on a $110 valuation. Exhibit 1. GMED 6-month price action Data: Refinitiv Eikon Q2 earnings report - record top-line growth Second quarter earnings were strong with upsides relative to consensus at the top and bottom lines. Sales of ~$264 million ("mm") were up ~500bps YoY and a record quarter for the company. Following difficult comps in Q2 FY21 the company still recognized its first $100mm month. Geographically, US turnover came in at $225mm, up 470bps YoY [20% annualized], ahead of stipulated North American market growth of ~5.3%, implying GMED captured additional market share during the quarter. Meanwhile, international sales came in ~690bps ahead at $38.4mm, underpinned by expansion of the global robotics portfolio. Segmentally, musculoskeletal sales were up 170bps YoY as the trauma portfolio continues to see upside. US spine sales saw a record quarter and 250bps YoY growth, whereas the enabling technologies division was the standout across the portfolio. It saw a 44% YoY gain to $29mm, again a record for the company. The company also recognized its 35,000 procedure milestone in its robotics segment - itself growing 30% YoY. Moving down the P&L and gross margins saw a 60bps YoY decline secondary to cost inflation and various headwinds impacting global supply chains. It does not forecast these trends to continue. Meantime, it recognized a $17.4mm R&D cost that came in to 6.6% of turnover, up ~40bps YoY. Meantime, Q2 GAAP net income lifted 31.4% YoY to ~$55.5mm printing earnings of $0.56 per share - flat YoY. GMED brought this down to FCF of $13mm for the quarter, itself down from a difficult comp of $51mm in free cash conversion for Q2 FY21. However, it also bought back ~$144.5mm of its own stock, with more than $150mm remaining under authorization for the repurchase program. With the performance, it reiterated FY22 full-year guidance of $1.02 Billion in sales and a non-GAAP EPS of $2.10 for the year. Speaking on the company's FY22 results, CFO, Keith Pfeil said: "I am pleased with our performance and note the resilience of our employees and partners as we manage through inflationary pressures, supply chain challenges and currency fluctuations. As we enter the back half of 2022, we are focused on driving continued share taking across our implant businesses, while we continue to expand on the sales of our technology to the marketplace, driving operational performance, managing execution and maintaining cost discipline are key focus items for our team as we continue throughout 2022, which will drive long-term shareholder value." As seen in Exhibit 2, GMED has managed the pandemic-period to date fairly well. FCF yield has remained steady rolling between 2-3%, whereas gross-operating income has remained equally as defensive. Over recent quarters, FCF yields have crept up and even managed to do so through the pandemic, as seen below. With that in mind, GMED carries terrific fundamental momentum into the forward-looking climate. Exhibit 2. FCF yields have remained steady and when cancelling out qualitative data - this is exemplary of resilient factor we want exposure to Data: HB Insights, GMED SEC Filings Additional features of resiliency are observed when examining GMED's return on investment. In terms of corporate value, it's best to think in terms of investment value and continuing value [earnings]. Return on investment ("ROIC") has been cyclical for the company, in-line with its capital budgeting cycle whereby substantial. Later in the discussion we made the necessary adjustments to GMED's GAAP earnings in order to reflect its true corporate value. The following series of charts demonstrates the change in data following. For instance Exhibit 3 demonstrates the relationship between FCF yield and ROIC for the company. However, post adjustment to earnings and investment, the picture is quite different as noted in Exhibit 4. Exhibit 3. Sequential ROI and FCF yield has remained steady and cyclical throughout the pandemic, in line with capital budgeting cycle Data: HB Insights, GMED SEC Filing As seen below, after capitalizing GMED's R&D expenditure and amortizing it on a straight line basis with a 5-year useful life, its return on investment continues to creep up on a QoQ basis. It came in at c.15% for the last quarter on an adjusted basis [74% annualized], more than seven turns ahead of the company's annual WACC of 10.04%. This is incredibly important as it demonstrates that whilst GMED is a capital-intensive operating model - particularly on its capital placements - it generates more than sufficient return on this on an quarterly basis. Resilient factors when looking ahead. Exhibit 4. Adjusting for GAAP recorded investment then we note ROIC reverts to the upside for GMED demonstrating it has a more than firm grasp on its capital-intensive operating model Data: HB Insights; GMED SEC Filings Finally, we observe the cyclical nature of GMED's invested capital and return on investment in the exhibit below. In particular, both quarterly and TTM figures are cyclical and in line with capital investment of the company. In particular, we've seen NOPAT ratchet up alongside the previous period's invested capital on average since FY18, and through the pandemic. Moreover, as seen on the right of the chart below, both market and corporate value have been responsive to this investment/return on investment cycle. With recent upturns in each, we believe further upside is warranted on the chart. Exhibit 5. As capital investment increases sequentially so too does NOPAT conversion. Meanwhile, return on investment remains cyclical and in-line with swings in market/corporate value. Data & Image: HB Investments US Equity Fund Reconciliations for valuation Seen in the exhibit below, below adjusted gross profit, we capitalize ~$17.4mm in R&D and remove $4.4mm in amortized intangibles, and add back $8mm in stock-based compensation to reconcile GMED's GAAP earnings to produce its cash earnings. This sees operating income lift to $114.7mm and earnings now a respectful $1.18 per share.

Sep 02
Globus Medical (NYSE:GMED) Will Be Hoping To Turn Its Returns On Capital Around

Globus Medical (NYSE:GMED) Will Be Hoping To Turn Its Returns On Capital Around

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want...

Aug 11
Is Globus Medical, Inc. (NYSE:GMED) Potentially Undervalued?

Is Globus Medical, Inc. (NYSE:GMED) Potentially Undervalued?

Globus Medical, Inc. ( NYSE:GMED ), might not be a large cap stock, but it saw a significant share price rise of over...

Shareholder Returns

GMEDUS Medical EquipmentUS Market
7D-3.4%-7.2%-6.9%
1Y-27.5%-32.3%-23.7%

Return vs Industry: GMED exceeded the US Medical Equipment industry which returned -32.8% over the past year.

Return vs Market: GMED underperformed the US Market which returned -23% over the past year.

Price Volatility

Is GMED's price volatile compared to industry and market?
GMED volatility
GMED Average Weekly Movement4.5%
Medical Equipment Industry Average Movement8.5%
Market Average Movement6.9%
10% most volatile stocks in US Market15.7%
10% least volatile stocks in US Market2.8%

Stable Share Price: GMED is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: GMED's weekly volatility (4%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
20032,400Dan Scavillahttps://www.globusmedical.com

Globus Medical, Inc., a medical device company, develops and commercializes healthcare solutions for patients with musculoskeletal disorders in the United States and internationally. It offers spine products, such as traditional fusion implants comprising pedicle screw and rod systems, plating systems, intervertebral spacers, and corpectomy devices for treating degenerative, deformity, tumors, and trauma conditions; treatment options for motion preservation technologies that consist of dynamic stabilization, total disc replacement, and interspinous distraction devices; interventional pain management solutions to treat vertebral compression fractures; and regenerative biologic products comprising of allografts and synthetic alternatives. The company also offers products for the treatment of orthopedic trauma, including fracture plates, compression screws, intramedullary nails, and external fixation systems; and hip and knee joint solutions, including modular hip stems and acetabular cups, as well as posterior stabilizing and cruciate retaining knee arthroplasty implants.

Globus Medical, Inc. Fundamentals Summary

How do Globus Medical's earnings and revenue compare to its market cap?
GMED fundamental statistics
Market CapUS$5.81b
Earnings (TTM)US$154.99m
Revenue (TTM)US$973.94m

37.5x

P/E Ratio

6.0x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
GMED income statement (TTM)
RevenueUS$973.94m
Cost of RevenueUS$247.99m
Gross ProfitUS$725.95m
Other ExpensesUS$570.96m
EarningsUS$154.99m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)1.56
Gross Margin74.54%
Net Profit Margin15.91%
Debt/Equity Ratio0.0%

How did GMED perform over the long term?

See historical performance and comparison