Analysts start Tactile Systems at buy, outperform

Analysts at BTIG Research, Piper Jaffray and William Blair initiated coverage of Tactile Systems Technology (NASDAQ:TCMD) with “buy,” “overweight” and “outperform” ratings, respectively.

Tactile makes pneumatic compression devices (PCD) to treat lymphedema, along with a chronic venous leg ulcer product. Tactile closed an IPO of 4,120,000 shares at $10 apiece earlier this month. The stock was changing hands at $12.98 at mid-day Monday.

“While the PCD and lymphedema markets are not well known, we believe Tactile has built a high-growth and profitable platform through a stellar sales and marketing channel and strong reimbursement relationships,” writes BTIG analyst Dr. Sean Lavin, who set a price target of $17 on the stock.

“We expect Tactile to use its newly acquired funds to increase sales and marketing and spur further sales growth,” he added.

Matt O’Brien of Piper, who also set a $17 target on the stock, said the company’s PCD products, are best-in-class and are expected to generate strong revenue growth (+20%) in a lightly penetrated category (below 5%).

“With its unique business model (bypassing the durable medical equipment providers) and going directly to the physicians and patients, we believe Tactile is able to capture more of the economics on its products, which results in a strong profitability profile for the business,” he added.

Margaret Kaczor of William Blair said Tactile has invested in three key areas – clinical data, technology and service, and reimbursement – to develop a successful business model that others will struggle to replicate for at least four-to-five years.

Tactile’s shares trade at 2.1 times forecasts for 2017 sales of $94-million, representing 22% growth. “This represents a discount compared with its medical technology peers with similar business models and growth rates (Inogen and NxStage Medical),” she added.