Stryker's investors seem to think the deal is just OK, with shares trading basically flat. Of course, at just over $600 million, it's a fairly small deal for Stryker, which sports a market cap of $56 billion.
In the acquisition, Stryker will get Entellus' minimally invasive treatments for various ear, nose, and throat (ENT) diseases, including the Xpress Multi-Sinus Dilation System and the Latera Absorbable Nasal Implant.
Stryker already has ENT products -- the NasoPore bioresorbable nasal dressing, for instance -- so this is a typical tuck-in acquisition where Stryker is hoping to use of economies of scale to increase sales while decreasing selling costs, resulting in higher profits for the larger acquiring company than the smaller company could muster.
Entellus Medical expects adjusted EBITDA for 2017 to come in at negative $23.0 million to negative $25.0 million, but revenue is growing at a 22% to 25% clip compared to last year, so with the cost savings and continued revenue growth, it shouldn't take too long for Stryker to turn a profit from the acquisition. Stryker thinks the acquisition will dilute its 2018 adjusted net earnings by approximately $0.04 per share and be accretive thereafter.
Shares of Entellus Medical touched above the $24 acquisition price today, implying that some investors think a competing deal could come in and top Stryker's offer. But considering the 50% markup, buying on hopes of an even higher price sounds more like gambling than investing.
Nevertheless, it might make sense for current investors to hold on to their shares for now to see if another offer appears, especially if it makes sense to take the tax consequences of selling in 2018 rather than this year.
10 stocks we like better than Entellus Medical
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Entellus Medical wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of December 4, 2017
- Michael Kors Still Crushing Coach With Teens
- Can Home Depot Survive a Market Downturn?
- Canada's Marijuana Oversupply Concerns Just Got Worse
- Tech Stocks This Week: Netflix and Twitter Pop and Apple Falls
- Should Intel Corp. Spin Off Its Factories?
- Missed the Tax Deadline? What Happens Now
- Earnings: 2 Hot Stocks to Watch Next Week
- Verizon Earnings: What to Watch
- Budgeting 101: How to Start Budgeting for the First Time
- 30 Social Security Stats That Might Surprise You -- and Make You Wealthier
- IBM Continued to Grow Revenue -- or Did It?
- Should You Buy Tencent Holdings After the Correction?
- For Ulta Beauty, E-commerce Growth Is a Double-Edged Sword
- More Than 2 Out of 3 Pot Users Drove High Within the Past Year, New Survey Shows
- 5 Ways to Guarantee You'll Be Miserable at Work
- 3 Stocks I'd Never Touch
- Forget Cryptocurrencies, You're Better Off Buying These 3 Stocks
- Here's What the Future of Retail Could Look Like
- Here's How Much Borrowers Pay on Loans After a Bankruptcy
- This Congressional Shake-Up Is Big News for Social Security