VAR - Embedded Expectations Analysis - 2019 12 19
Varian Medical Systems, Inc. (VAR:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) Earnings, with a 26.3x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm. Additionally, management is confident about their acquisitions, revenue, and growth.Specifically, management is confident they are focusing on four strategic enablers for their patients, and they are confident that the Karolinska University Hospital has begun testing their Bravos afterloader. Furthermore, they are confident Noona will reach 22,000 new cancer cases per year and that they can grow their revenue between 9% and 12% in 2020. Finally, they are confident their software business is positioned for growth in developed and developing markets, and they are confident their recent acquisitions have performed well.
Varian Medical Systems is a manufacturer of medical devices and software for treating cancer and other medical conditions. The company's segments are: Oncology Systems, which designs, manufactures, sells and services hardware and software products for treating cancer with radiotherapy, and treatments such as fixed field intensity-modulated radiation therapy, image-guided radiation therapy, volumetric modulated arc therapy, stereotactic radiosurgery, stereotactic body radiotherapy and brachytherapy, as well as associated equipment; and Proton Solutions, which develops, designs, manufactures, sells and services products and systems for delivering proton therapy, for the treatment of cancer.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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