{"id":36302,"date":"2023-07-16T04:33:41","date_gmt":"2023-07-16T08:33:41","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/avanos-medical-leaning-up-attractive-returns-on-incremental-capital-reiterate-buy\/"},"modified":"2023-07-16T04:33:43","modified_gmt":"2023-07-16T08:33:43","slug":"avanos-medical-leaning-up-attractive-returns-on-incremental-capital-reiterate-buy","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=36302","title":{"rendered":"Avanos Medical: Leaning Up, Attractive Returns On Incremental Capital, Reiterate Buy"},"content":{"rendered":"
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Investment Summary<\/h2>\n

Following a series of investment updates since my April publication on Avanos Medical, Inc. (NYSE:AVNS<\/span>), there is still the potential to unlock further risk in my informed view.<\/p>\n

As a reminder, the buy thesis on AVNS is predicated on the following factors:<\/span><\/p>\n

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  1. The company’s focus on a leaner cost structure, aiming for $55mm in savings by FY’25.<\/li>\n
  2. Reduction in FY’23 sales well anticipated and now baked into equity value.<\/li>\n
  3. Valuations supportive, with my numbers calling for a rating to 54x earnings (104% upside at the time of the April publication).<\/li>\n<\/ol>\n

    Here I’ll run through the additional critical facts for consideration in the investment debate, and what’s changed in my investment thesis. Chief among these are the changes to forecasts, obtained via the company’s “transformations” to be achieved this year. Net-net, I am reiterating AVNS as a buy, eyeing the same $40 price objective as in the previous analysis.<\/span><\/p>\n

    Figure 1.<\/p>\n

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    Data: Updata<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

    Critical Factors For Consideration<\/h2>\n

    The major critical updates to AVNS’ outlook centre around its most recent numbers and capital management initiatives this YTD. Consensus now sees $0.61 in quarterly earnings by Q4 FY’24, with the ramp on this looking mighty attractive in my eyes [Figure 2].<\/p>\n

    Figure 2.<\/p>\n

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    Data: Seeking Alpha<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

    1. Divestitures, Investitures<\/h3>\n

    First on the examination plate is AVNS’ sale of its struggling respiratory health business to Sunmed, a provider or anaesthesia and respiratory care services. There are benefits to the deal:<\/p>\n