At its annual investors day Thursday, the San Diego, Calif.-based medical device company said it plans to grow its top line at a compound annual growth rate of 13%-15% from 2012-2017, as well as increase its sales margins substantially and grow its free cash flow significantly.
On February 22 shares of Volcano were hammered on Wall Street when the company abruptly lowered its 2013 guidance to 8¢-11¢ earnings per share on $406 million-$412 million in sales, far below the 29¢ EPS on $423.5 million analysts were projecting. That move prompted a flurry of
investment houses to downgrade VOLC stock, including Goldman Sachs, which changed its rating from "conviction buy" to "neutral."
On Thursday, Volcano CEO Scott Huennekens said the company expects its base revenue to grow 11-13% from 2013-2017 as the company makes strategic moves in "physiology, IVUS [Intravascular Ultrasound], OCT and our Axsun Industrial leadership, their innovation, also by expanding into new clinical indications to grow the market penetrations and market sizes and to continue to expand our direct distribution around the world."
"Overall, our vision is to be a platform company for guiding and optimizing minimally invasive therapies, utilizing visualization, physiology and future technologies," he said. "If you look up here historically, the world of medical devices is really based on the noninvasive market, the Philips, GE, Siemens of the world. And then these invasive therapeutic companies, the Medtronics, Covidiens, Boston, J&J, et cetera, where we saw an opportunity back when we founded Volcano, was really to build on the middle bucket and especially in the cardiac area and then growing from there, where we could take visualization and other physiologic parameters and do a better job of doing 3 things: deciding who really should be treated with better diagnostics invasively; determine how to treat somebody if they needed it; and then validate that you did the treatment well so there weren’t long-term events associated with it."
He added that Volcano is looking to be more active in the M&A space, targeting the coronary, peripheral and structural heart technologies that have over $500 million in addressable markets.
Analysts on The Street seemed to respond to the story positively.
Credit Suisse upgraded shares of Volcano from neutral to outperform and put a $27 per-share price target on the stock.
In a note to investors, Leerink Swann analyst Danielle Antalffy wrote that "shares could continue to trade in a tight range near term as 2013 remains a ‘transition’ year as VOLC weathers still-tough macroeconomic conditions while absorbing dilution from recent acquisitions. But ultimately, we think VOLC shares can trader higher over the next 12-18 months as focus shifts toward a return to low- to mid-teens sales growth in 2014 and beyond. We remain OP-rated with a $30 valuation."
Shares of VOLC were up about 2% through mid-morning trading on The Street Friday, hitting a high of $23.26, after closing at $22.52 Thursday,