Sometimes flying a bit below the radar can be helpful. Although dj Orthopedics
In fact, ahead of the company's presentation at an investment bank conference, it announced that third-quarter revenue would surpass current expectations. As opposed to the mean analyst estimate of about $68.5 million, dj Orthopedics is projecting revenue of $70 million to $71 million. Assuming that it comes in at the midpoint, that would represent nearly 13% growth from last year.
Now, 13% growth is generally not much to get excited about in the world of small-cap medical technology stocks. What makes dj Orthopedics a little different, though, is that it is both profitable and getting more so. In other words, operating leverage is improving, operating margins are expanding, and net profitability is growing faster than revenue.
Even though dj Orthopedics doesn't go head-to-head with the big boys in the operative orthopedics markets, those big companies do compete with it in the non-operative market for soft bracing, pain care, and bone growth stimulation. Accordingly, I'm not quite certain that today's price offers enough of a margin of safety.
The company is certainly doing well and near a 52-week high, but today's price pretty much presumes that the good times will continue. I do understand the appeal of a seemingly improving orthopedics company that isn't facing the pricing risk projected for the operative markets, but I think this cat is more than out of the bag. Personally, I wouldn't rush to sell it, but I would at least start thinking about a protective stop-loss to lock in some easy profits.
For more on the orthopedic space:
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).