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Inside IHI’s Mid-Caps: Masimo Shares Rise on Better 1Q16

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Reviewing IHI mid-caps

The mid-cap stocks of the iShares US Medical Devices ETF (IHI) rose 1% and outperformed the ETF and the SPDR S&P 500 ETF (SPY) on May 5, 2016. Among the 16 mid-cap stocks in IHI’s portfolio, 12 stocks rose and only four fell from its previous closing. The mid-cap stocks of IHI account for 19.8% of IHI’s portfolio.

The above graph reflects the daily changes of IHI mid-caps along with IHI and SPY. As of May 5, 2016, IHI mid-caps fell 1.4%, and SPY fell 0.7%.

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Masimo shares spike on better 1Q16 earnings

Masimo (MASI) has announced its 1Q16 earnings. Below is a summary of its earnings report:

  • revenues of $171.2 million including royalties, which represents an increase of 10.8% compared to 1Q15
  • stand-alone product revenues of $163.3 million, a rise of 10.8% compared to 1Q15
  • on a GAAP (generally accepted accounting principles) basis, net income of $27.6 million or $0.53 per diluted share, compared to $20.5 million or $0.38 per diluted share in 1Q15
  • increased its 2016 revenue guidance to ~$677 million against earlier guidance of $670 million

Masimo closed at $45.75 and was trading above the 20-day moving average. On a year-to-date basis, the stock rose 10.2%. Masimo is trading at a 2016 forward PE (price-to-earnings) multiple of ~24.8x compared to some of its mid-cap peers in IHI. They include Abiomed (ABMD) and Hill-Rom Holdings (HRC), which are trading at 2016 forward PEs of 81.9x and 14.6x, respectively. Masimo has a book value of $5.47 per share. At the current price, the stock is trading at a PBV (price-to-book value) of ~8.4x. Masimo has a weight of 0.6% in IHI’s portfolio.

Analyst estimates and recommendations

On May 5, 2016, Bloomberg analysts estimated the 12-month target price of Masimo at $50.90. Four analysts have recommended a “buy” for the stock, three have recommended a “hold,” and none have recommended a “sell.”

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