Masimo (Nasdaq: MASI) should enjoy growth through the middle of the next decade, thanks to its exploration of opportunities outside its core market that are more driven by hospital automation, according to a new equity research report out of Barclays.
Masimo is on track to having 8–10% top-line growth and 12–15% earnings per share growth through 2025, according to the Barclays report. The growth can be attributed to new market entry and further expanding the company’s Rainbow platform, Root and Patient SafetyNet.
The company already has its Root connectivity hub that allows for third-party access from outside of the hospital system. This means other companies can create technology that works with Root. Masimo also recently released its Telehealth Rad-97 for home monitoring.
Top-line growth is being driven by Masimo’s relationship with Philips in the install base and in the acuity monitoring market, according to the report. Masimo recently started offering Rainbow Lite SET sensors that enable the monitoring of the Masimo Oxygen Reserve Index. The sensors show an improved PVi to assess fluid responsiveness.
Masimo’s total available market is also expected to double by 2025, from the $3 billion it is today, at a 9% consumer annual growth rate.
The company’s recurring revenue base will see a 98% renewal rate with its Oximeter devices that are sold on contracts for five to seven years, according to the Barclays report, which said the company’s technology works well. It’s hard for competitors to enter the space, the report said.
“Looking at near-term expectations, we think [Masimo] sets up well for 2018. Specifically, initial guidance includes an expectation for 9% product growth. We note this compares to 12% product growth in 2017 on an 11% comp in 2016,” said the report’s author Matthew Taylor. “We are impressed by the quality of the business, management team and pipeline, and like the potential for upside given our expectation for acceleration in the core business and new product uptake.”
