1 Healthcare Firm Billion Dollar Funds Bets On

Lantheus Holdings isn’t a healthcare firm that springs to the top of investors’ minds as say a United Healthcare might but it’s attracted the interest of one money manager who oversees almost $20 billion, Farallon Capital Management.

What is it that this astute asset manager sees in this off-the-radar firm which has sold off big time in the past 3 months?

Key Points

• Lantheus stock has been growing revenues at a rapid rate over the past 5 years but it’s set to continue over the next 5.
• As impressive as the top line growth forecasts are, the bottom line projections are even more lofty.
• Analysts consensus estimates are for the share price to rise considerably from current levels.

Where Lantheus Focuses

Lantheus has a specialty in prostate cancer and it’s been a huge win for the firm. The top line growth has been absolutely astronomical over the past 8 quarters, regularly topping 100%+ year-over-year comparisons and now with an annual run rate of $1.2 billion.

What has likely attracted Farallon Capital is the firm’s ability to convert huge top line growth to bottom line growth. Just 3 years ago, earnings before interest and taxes were barely positive, if at all, from one quarter to the next.

Fast forward a few years, and the revenue growth has translated to nine-figure plus EBIT in each of the past three quarters. But that alone isn’t likely the reason for Farallon Capital getting so excited.

It’s what’s to come that has them more buoyant, we expect. Revenue growth from an already high level is forecast to continue annually at north of 13% for the next 5 years and net income is projected to dwarf the top line growth with a forecasted rate of over 85% annually.

If those numbers are correct, investors are likely to look back at the present selloff in share price as a rare opportunity.

Is Lantheus a Buy?

According to analysts, the upside for Lantheus now is quite astronomical. The fair value median, in their view, sits at $92 per share, which is over 60% higher than where the share price currently sits.

With four analysts revising their estimates higher for the upcoming quarter, sentiment is clearly shifting positively for the firm, and the broad expectations are for another year of profitability to follow.

If there were one drawback it would be the high p-e ratio now of over 35x, which is lofty but it should be noted that if earnings grow at the pace forecast this multiple will seem low on a 5 year time horizon.

It’s all about the execution now by management. If they can deliver on the forecasts the Street is expecting, the current share price will really seem like a steal when looking back in the rearview mirror. It’s no wonder then that such a massive money manager has been willing to take a meaningful stake in the firm on expectations that a large disconnect exists between price and value.