Cynosure: Profits in Cosmetic Surgery
10/19/2016 7:00 am EST
Most people love to eat, abhor exercise, but want to look fit. And many don’t want to go under the knife to have fat surgically removed through procedures such as liposuction, explains growth expert Linda McDonough, and editor of the Growth Stock Strategist.
For them, Cynosure (CYNO) has “SculpSure,” which is like a skinny dream come true. SculpSure uses lasers from the outside to melt fat in half the time of competing treatments and with less pain.
SculpSure is the world’s first hyperthermic laser treatment (it uses a heating process to melt fat deposits) to remove love handles and belly fat non-invasively.
SculpSure takes just 25 minutes, lets doctors treat multiple areas simultaneously, requires minimal local anesthesia and has patients up and running almost immediately. Customer satisfaction is above 90%.
Rave reviews and high patient satisfaction rates are prompting more doctors in the $12 billion cosmetic surgery industry to adopt the procedure.
Cynosure is no flash in the pan. The company, which went public in 2005, has been selling cosmetic laser products since 2001. Its flagship system, PicoSure, is used to remove tattoos, sun spots and age spots.
Other products include Icon, a laser used to treat acne, scars and stretch marks, and the MonaLisa Touch, a laser therapy for gynecologic health.
Cynosure sells treatment systems to doctors and then enjoys a steady stream of revenue from disposable products that are needed to do the procedure.
Profits rose 22% in the first half of 2016 and are expected to increase 24% for the year. Fiscal 2017 should usher in 40% growth, as sales to new doctors take off. Although the stock is up 24% year-to-date, we think it could jump another 25% to our $65 target.
The firm has $210 million, or $9 a share, in cash and no debt. Cash flow is strong, with the company generating $16 million of cash in the first half of this year versus a use of $1 million last year.
Our target is based on a mid-20s multiple on 2018 estimates. Although the stock is up 24% year-to-date, we think it could jump another 25%.
By Linda McDonough, Editor of the Growth Stock Strategist