LeMaitre: Further Upsides Supported By Longer Competitive Advantage Period

Investment Thesis - LeMaitre Vascular, Inc. (NASDAQ:LMAT) is a provider of medical devices for treating peripheral vascular disease, end-stage renal disease, and cardiovascular disease [5][30] - The company has demonstrated a 27% CAGR in market value and an 18% CAGR in dividend growth since 2011, indicating strong long-term performance [4][35] - Current valuation estimates range from $100 to $107 per share, supported by increasing economic profit and projected sales growth of 12.1% in FY'24 [15][20] Financial Performance - The company's market capitalization is approximately $1.85 billion, with 22 million shares outstanding, resulting in an EV/NOPAT multiple of 51.2x [8][18] - Economic profit increased from $3 million in FY'22 to $11 million in the trailing twelve months (TTM), reflecting improved operational efficiency [11][18] - NOPAT margins have improved to 18%, with capital turnover increasing to 0.95x, indicating better utilization of assets [11][35] Competitive Advantage - The market perceives LMAT's competitive advantage period (CAP) to be over 5 years, an increase from approximately 2 years in FY'22, suggesting enhanced growth potential [12][30] - The company has a strong focus on niche products with high switching costs, allowing it to maintain higher profit margins compared to industry averages [35][30] - International sales have shown significant growth, with a 44% increase in Q1 FY'24, positioning the company well for future expansion [35][30] Growth Catalysts - Management plans to expand its direct sales force to 150 representatives by the end of FY'24, which is expected to drive sales growth [27] - The company anticipates receiving multiple CE Marks for its products, which will facilitate entry into new markets and enhance sales [28] - Implementation of a new enterprise resource planning system is expected to improve operational efficiency and analytics, contributing to future growth [28] Valuation Insights - The current high multiples are justified by the company's strong fundamentals and growth prospects, with potential for further multiples expansion [20][19] - A 5% contraction in multiples still supports a valuation of approximately $90 per share, indicating a margin of safety [20][30] - The company has consistently generated free cash flow of $25–$35 million annually, reinforcing its financial stability [35][30]