ICU Medical (NASDAQ:) is one of the notable post-pandemic recovery plays that investors have been curious about of late. This company is a leading medical device manufacturer and can be of great benefit when elective surgery and treatments return to pre-pandemic levels. 

This company produces products that are used primarily in ICUs, as the name implies. This company specializes in infusion therapy and monitoring products. These products are the critical infrastructure for a hospital.

The ICUI stock is on the rise in recent days. As analysts noted high volatility in many sectors, the stock rose more than 35% over last week. This stock is still my favorite, and I have many reasons to remain optimistic.

Let’s take a look at the key catalyst that has been driving up ICUI stock price recently.

(See ICU Medical stock charts on TipRanks)

ICU Medical Announces Acquisition Plans

ICU Medical announced on September 8 that it would be acquiring the medical division of Smiths Group (OTC:) PLC. This deal will allow ICUI to become an IV Therapy company. Moreover, it would essentially provide workflow improvements that will ultimately boost the company’s financials. ICU Medical’s growth prospects will also be boosted by the deal. 

The impressive product pipeline that ICUI will be acquiring is a great asset to the business. Smiths Medical makes a number of medical tools, including positive air pressure systems and syringe pumps. This agreement will make ICUI a top supplier of medical equipment among the leading hospital administrations.

In most cases, when there are acquisition deals, shares of the acquirer have a tendency to soar. Because investors value each company based upon the price paid by the acquisition firm, this happens. 

As was expected, the news of the acquisition acted strongly to propel ICUI stock. Together, the acquired entity will generate $2.5 Billion in revenue. About $2.35 Billion will be spent on equity and cash to fund the acquisition. 

Smith Group will be receiving $1.85billion cash from ICU Medical and 2.5m shares. A $100 million additional will be included in the agreement. The amount of ICU Medical stock traded at $300/share for 30 days over the next three years will determine this.

A few additional incentives could increase the deal’s value to $2.8 million. The structure of this deal seems to have been approved by the investors. 

ICU Medical CEO Vivek Jain stated that this acquisition makes sense for the medical device market and fits quite well with ICU’s business plans. 

EPS Growing Rapidly

A company’s share price usually tends to follow its earnings per share (EPS). Or, in other words: earnings per share is a key factor long-term investors should consider when investing in shares. 

Interestingly, ICU Medical has managed to grow its earnings per share by 4.9% each year, for the past 3 years. This might not be a high growth rate, but it does show that ICUI’s EPS is heading in the right direction. 

One of the best ways to evaluate a company’s growth is to check how its revenue and EBIT margins are moving. ICU Medical appears to be experiencing flat revenues and low EBIT margins, year over year. This might not pose a problem for investors, but the future direction of this stock is still unknown. 

Wall Street’s Take

As per TipRanks’ analyst rating consensus, ICU Medical is a Moderate Buy. There are two Buy recommendations out of the 2 analyst ratings.

The average ICU Medical price target is $294, implying an upside of 21.08%. The price targets of analysts range from $286 to $302 per shares.

Bottom Line

ICU is a post-pandemic play with significant growth potential. It is reasonable to expect that the growth catalysts are still strong. The company’s acquisition of ICU Medicals is expected to improve ICU Medicals growth prospects. Insider ownership of this stock is also a positive feature.

ICUI stock seems to be a good investment that all investors should consider.

Disclosure: Chris MacDonald had no position at the time this article was published.

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