Canaccord Sees Compelling Value in Novadaq Technologies Inc (NVDQ) Shares

Novadaq Technologies Inc (NASDAQ:NVDQ) shares are rising close to 5% as the medical imaging solutions maker stands to benefit from receiving reimbursement coverage from CIGNA Corporation (NYSE:CI) for two products: DermACELL, used in breast reconstruction surgeries, and DermACELL AWM, used to treat diabetic foot ulcers.

In reaction, Canaccord analyst Jason Mills is out with a bullish call, reiterating a Buy rating on NVDQ with a price target of $10, which represents a 43% increase from where the shares last closed.

“To date, Novadaq has faced a headwind in its tissue business vis-à-vis a lack of reimbursement for DermACELL from payors. We believe the positive coverage decision by Cigna could spur positive coverage decisions from more payors, both large and small, as our research suggests many payors tend to follow Cigna’s coverage decisions, and thus serve as a tailwind to management’s initial 2017 guidance. We continue to believe in the value proposition posed by Novadaq’s imaging platform, coupled with its unique, synergistic DermACELL product line. We view the recent strategic moves undertaken to focus resources on driving the recurring revenue segment of the business (>50% in 2017E) – while initially poorly communicated by management – may ultimately prove positive for shareholders, either by making the firm more attractive to an acquirer or positioning the company to achieve and augment profitability as a standalone entity over the long term,” Mills contends.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Jason Mills is ranked #567 out of 4,496 analysts. Mills has a 61% success rate and gains 6.5% in his yearly returns. However, when recommending NVDQ, Mills loses 24.9% in average profits on the stock.

TipRanks analytics exhibit NVDQ as a Buy. Based on 28 analysts polled by TipRanks in the last 3 months, 16 rate a Buy on Novadaq stock, 10 maintain a Hold, while 2 issue a Sell. The 12-month average price target stands at $115.13, marking a nearly 4% upside from where the stock is currently trading.

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