NextWave Research Analysis of Healthcare M&A Shows it May Not Signal the Bottom

Share Article

NextWave Research announces the publication of "Does An Increase in Healthcare M&A Signal a Bottom? Not Yet!" highlighting recent activity and the market implications.

NextWave Research announces the publication of "Does An Increase in Healthcare M&A Signal a Bottom? Not Yet!" highlighting that the strength of M&A does not necessarily translate into a signal that the market has reached a bottom.

Analyst John M. Putnam, CFA states that despite the attractive valuations of recent M&A deals "There are several caveats that must be put forward before the group returns to clear sailing. First, the bottom can be a long trough. While healthcare stocks may outperform other groups on a relative basis, their ultimate performance will still be dictated by the market's overall recovery. Secondly, attractive valuations can become even more attractive. If the market reacts negatively to any number of still unknown factors, healthcare stocks will surely decline as well. And finally, since corporate buyers are strategic buyers, they have longer time horizons than do institutional or even individual investors."

He further points out that, based on current valuations within the orthopedic, cardiovascular and medical device space, the acquisition premiums appear to be 20% to 25% or fairly reasonable based on historic trends which can average 5.0X or 6.0X revenues. These premiums are still one-third below that of the 52 week highs posted by the stocks of these companies still suggesting reasonable valuations. However, he cautions that "Although valuations appear reasonable, we are not sure that the M&A activity has picked up enough to declare the bottom. As we stated at the beginning, the trough may be long and deep."

Some companies mentioned are Johnson & Johnson (NYSE: JNJ), Abbott Labs (NYSE: ABT), Medtronic (NYSE: MDT), Boston Scientific (NYSE:BSX), St. Jude (NYSE: STJ), Pfizer (NYSE:PFE), Wyeth (NYSE:WYE), Merck (NYSE:MRK) and Proctor & Gamble (NYSE:PG).

NextWave Research founder, Stephen M. Dunn states "While healthcare is traditionally a defensive sector, we advise investors to be wary of extrapolating healthcare M&A activity into a signal that the market has bottomed."

Interested readers can access all of NextWave Research's analysis free-of-charge at http://www.NextWaveResearch.com with articles available in 11 languages.

About NextWave Research:
NextWave Research was created to address the dearth of professional Wall Street research coverage for quality small-cap companies. We believe that quality companies who choose to sponsor research analyst coverage provide a desperately needed service to both individual and institutional investors with reports and commentary freely available to all. We Don't Get Paid to Like Companies-We Get Paid by Companies We Likeā„¢.

# # #

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Stephen M. Dunn

John M. Putnam
Visit website