Piper starts Bovie Medical at overweight

Piper Jaffray initiated coverage of Bovie Medical (NYSE:BVX) with an “overweight” rating and $6 price target. The stock closed at $4.24 on Friday.

Bovie is best known within the operating room for its electrocautery products, which continue to do well, but a newer management team has repositioned the company for rapid growth by investing heavily in R&D to yield highly differentiated devices that should allow it to capture share in some large markets, writes analyst Matt O’Brien.

The company’s J-Plasma product can ablate soft tissue during surgery at a lower energy level, resulting in less collateral tissue damage, with tactile feel, and at a lower price point, he added.

“Since the introduction of this product, growth at the company has accelerated, and we believe it will continue, with other technologies augmenting results in the coming quarters,” Mr. O’Brien said. The PlazXact product is expected to be next.

After completing a recent follow-on offering, shares of Bovie fell about 15% but have since recovered a bit and now trade at a multiple of 2.6 times Mr. O’Brien’s 2017 revenue estimate, which is a 16% discount to its comp group and a “good entry point, in our view, for this compelling technology provider. Consequently, we encourage risk-tolerant investors to start positions,” he said.