Lantheus Holdings Inc. (NASDAQ:LNTH) Presents a Compelling Value Investment Case

For investors looking for chances where a company's market price may not completely match its basic business condition, a systematic value investing method can be a practical structure. This plan requires finding stocks that seem priced below their worth based on fundamental measures, such as earnings, cash flow, and financial condition, while still showing good operational results. The aim is to find good companies selling for less, providing a possible "margin of safety" as famously supported by Benjamin Graham. One way to find such possibilities is by filtering for stocks with good valuation marks along with acceptable scores in profitability, financial condition, and growth.

A recent filter using this "acceptable value" method has pointed out Lantheus Holdings Inc (NASDAQ:LNTH) as a stock deserving more examination. The Massachusetts-based company, a supplier of diagnostic imaging and nuclear medicine products, receives high marks on several important fundamental areas, indicating it may be selling below its true worth.

Valuation: An Interesting Entry Point

The most noticeable part of Lantheus's current profile is its valuation, which seems low compared to both its industry and the wider market. This is the central idea of the value investing argument: finding a large difference between price and estimated worth.

• Price-to-Earnings (P/E) Ratio: LNTH sells at a P/E ratio of 10.59, which is viewed as fair on its own. More significantly, it is less expensive than about 94% of similar companies in the Health Care Equipment & Supplies industry, where the average P/E is above 40.
• Forward P/E and Cash Flow: The valuation view stays interesting looking forward. The company's Price/Forward Earnings ratio of 11.17 is also below 93% of the industry. Also, its Price/Free Cash Flow ratio is ranked as less expensive than 96% of industry rivals, showing the market is paying a small price for its ability to generate cash.
• Market Comparison: LNTH's valuation multiples are very different from the S&P 500, which currently sells at a P/E of 26.76 and a Forward P/E of 23.96.

For a value investor, these numbers indicate the stock is priced at a large discount, possibly offering that desired cushion between market price and true worth.

Financial Health: A Good Base

A low valuation by itself is insufficient; a company must also have stable financial standing to avoid the dangers of a "value trap." Lantheus receives an 8 out of 10 on ChartMill's Financial Health rating, showing a strong balance sheet that can endure economic changes.

• Solvency and Debt Management: The company has an Altman-Z score of 4.03, showing a low short-term chance of financial trouble and doing better than 75% of its industry. Importantly, its debt-to-free-cash-flow ratio is a very good 1.37, meaning it could pay off all its debt in just over a year from its current cash flow, a number that puts it in the top 10% of its sector.
• Liquidity Position: With a Current Ratio of 2.67 and a Quick Ratio of 2.49, Lantheus has more than enough liquidity to meet its short-term responsibilities, giving it operational freedom and strength.

This good financial condition is important for the value plan, as it lowers the chance that the low valuation is a sign of basic financial problems or coming trouble.

Profitability: Quality for Less

Value investing is not only about buying the least expensive assets; it is about buying quality assets for a low price. Lantheus shows high-quality profitability, receiving an 8 in this group. Its operations are efficient and produce good returns on capital.

• Good Margins: The company has an Operating Margin of 22.63%, doing better than 94% of its industry peers, and a Profit Margin of 10.99%, which is higher than 86% of the sector. These margins have gotten better in recent years.
• Efficient Capital Use: Lantheus produces a Return on Invested Capital (ROIC) of 13.60%, placing it in the top 6% of its industry. This shows management is using capital well to create profits, a key sign of a well-managed business.

This profitability picture supports the idea that the company's low valuation is not explained by poor operations. Instead, it suggests the market may be missing a basically profitable company.

Growth: A Balanced View

While not a very high-growth story, Lantheus shows a reasonable and changing growth path, which is important for a value investor to make sure the business is not in lasting decline. Its Growth rating is a 5, showing a combination of good past performance and more average future expectations.

• Past Performance: Over the last several years, the company has achieved very good average yearly growth in Revenue (34.59%) and Earnings Per Share (42.10%), although it saw a decrease in EPS over the most recent year.
• Future Expectations: Analyst estimates point to continued, though more limited, growth in the coming years, with average yearly increases forecast around 5.4% for Revenue and 3.0% for EPS.

This change from very high past growth to steadier, maintainable increase is a common stage of maturation. For a value investor, the important point is that growth is still positive, which should help maintain or raise the true worth over time, rather than reduce it.

Conclusion

Lantheus Holdings offers an interesting example for a value-focused filtering method. The stock seems notably priced below its worth compared to its industry and the wider market, selling at large discounts on earnings and cash flow numbers. Importantly, this low valuation is combined with good scores in financial condition and profitability, indicating the discount is applied to a stable, well-managed business instead of a weakening one. While its growth rate is becoming more normal, it stays positive, providing a base for future value increase.

This pairing, a low price on a financially healthy and profitable company, is exactly what filters like the "Acceptable Value" method are made to find. Investors wanting to examine other stocks that meet similar conditions of good valuation, acceptable profitability, condition, and growth can find more results via this link.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer or solicitation to buy or sell any securities. The analysis is based on data and ratings provided by ChartMill, and investors should conduct their own due diligence and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results.