Natus Medical: Olympic Medical Facility a 'Sound Strategic Fit'

Roth out positive on Natus Medical (BABY) after they visited the company's Olympic Medical facility in Seattle to gauge the acquired business' manufacturing capabilities and assess its product offering. They came away content that Olympic Medical is a sound strategic fit, given its breadth of base neonatal care products. Firm continues to believe the integration of the bulk of Olympic's products into Natus' product portfolio, as well as the shift from a primarily direct mail model to a direct sales force, should drive volume growth and pricing strength across Natus' neonatal account base.

In addition, they spent time checking out the CFM and CoolCap devices. Firm believes both devices complement each other not only in the diagnosis and treatment of HIE, but also with respect to manufacturing, as both devices are housed and comprised of similar technology. They expect this latter point to provide significant profitability out of the CoolCap device.

At Roth's recent growth stock conference, Natus' management discussed its long-term corporate goals of achieving a revenue run rate toward the $250 million level by 4Q08 and to grow EPS by close to 50% annually. Firm believes management's track record over the past few years has demonstrated an ability to execute this type of combined organic and acquisition-based strategy, while driving toward enhanced profitability.

Firm reiterates Buy and raises price target to $22 from $20.

Notablecalls: This note might move this baby.

BABY 1-yr chart