Elbit Medical Imaging is trading at a 30% discount compared to its estimated economic value, according to analyst Sharon Yeager of Meitav, who issued a "Buy" recommendation on the Elbit Medical Imaging share. Meitav set a target price of $10 in the next 12 months for the share, which has been trading recently at $7.7.
The primary reason for Elbit Imaging’s low pricing, according to Meitav, is the low price/earnings ratio at which it is trading. It is estimated that the increasing demand for medical diagnostic equipment in developing countries will increase the company’s profitability to above average.
In addition, Elbit Imaging is likely to benefit from strategic changes being drafted, which could lead to an IPO for Elbit Ultrasound, a subsidiary company. This company is in the process of a successful rehabilitation process, which, together with the reorganization in another subsidiary, Elscint, is likely to improve the company’s holdings. Among the group’s strength’s, Yeager notes its strong technological reputation and new strategic agreements that Elscint recently signed with Siemens, General Electric and Phillips, which are supposed to improve that company’s standing.
Elbit’s most prominent weaknesses are the fact that the company is a small player in a market dominated by giants, the highly competitive medical imaging market, due to a global decrease in government budgets for the health sector, and Elscint’s negative image on the capital market.
Elbit Medical Imaging began operation as a separte company when Elbit was spun off at the end of last year. Medical imaging enables doctors to use non-invasive procedures to see inside the body of the patient. The advantages of such techniques are savings on the surgeon’s hours and short diagnosis times. Clients are medical institutions and research facilities who make the purchases as part of multi-year supply plans.
The medical imaging market was estimated at $8 billion for 1996, including both products and accompanying services.