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Here's Why LeMaitre Vascular Inc. Is Falling Today

By Brian Feroldi – Apr 26, 2018 at 10:17AM

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Shares plunge after the company's first-quarter results miss the mark.

What happened

In response to reporting first-quarter results, shares of LeMaitre Vascular (LMAT 0.92%), a medical device maker focused on niche products used during vascular surgery, fell 20% as of 10:35 a.m. EDT on Thursday.

So what

Here's a review of the key numbers from the period:

  • Sales grew 8% to $26 million. That was slightly behind the $26.42 million that Wall Street had projected.
  • Gross margin fell 80 basis points to 71.1% because of product mix and "manufacturing inefficiencies."
  • Operating expenses only grew 3% to $13.6 million. 
  • Net income jumped 20% to $3.9 million, or $0.19 per share. That was two pennies worse than what Wall Street had predicted. 

Management also updated its guidance for the full year:

  • Second quarter sales are expected to land between $26.6 million and $27.4 million. This is lower than the $28.2 million that analysts had predicted.
  • Second quarter EPS is expected to land between $0.41 and $0.43. That's much higher than the $0.25 that analysts were expecting. 
  • Full-year 2018 sales guidance was lowered by a few million dollars to a new range of $106 million to $109 million. That's several million dollars behind what analysts wanted to see. 
  • Full-year 2018 EPS guidance was increased to a new range of $1.05 to $1.13. That's well ahead of what the pros were projecting. 

Traders reacted harshly to the worse-than-expected quarterly results and mixed guidance.

Three people looking at a computer screen and acting concerned.

Image source: Getty Images.

Now what

LeMaitre Vascular's trailing P/E ratio was trading well above 45 prior to this report, so it makes sense that the stock is falling hard given the disappointing first-quarter results. However, management's full-year guidance is still calling for 7% revenue growth and 27% profit growth, which isn't too shabby in the grand scheme of things. That's especially true when you consider that the company recently divested a few of its general surgery product lines. That decision will cost the company about $3 million in annual revenue and $2.5 million in gross profit, which helps to explain why full-year revenue projections were lowered for the full-year.

Overall, I think that shareholders should view today's drop as a valuation adjustment instead of reason to believe that the business is in trouble. With shares now trading at a far more attractive valuation, I think that right now is a great time for new investors to consider opening up a position. 

Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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LeMaitre Vascular, Inc. Stock Quote
LeMaitre Vascular, Inc.
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