Tickers in this Article: LMAT, EW, KNSY, VASC
Vascular surgeon Dr. George LeMaitre established his company, LeMaitre Vascular (Nasdaq:LMAT), back in 1983, after the idea he had for a valve-cutting device was rejected by the large company he had approached to make it. Undeterred, he found an engineer and they created their own company to manufacture the device. 28 years later, LeMaitre's idea has blossomed into a small but growing business whose stock has plenty of potential. TUTORIAL: Brokers and Online Trading Guide

Steady Growth
LeMaitre's revenues have grown every year for the past eight from $17.4 million in 2002 to $56.1 million in 2010. The Q4 conference call mentioned that 2011 would be a ninth consecutive year of growth with revenues reaching $62 million, an 11% increase year-over-year. Most importantly, it's growing through a combination of organic sales and bolt-on acquisitions. From a profit standpoint, it expects 2011 operating margins of 10%, a 40% improvement over 2010. The improvement in profitability over the last three years has enabled it to initiate a program to enhance shareholder value.

Dividends and Share Repurchases
LMAT initiated a two-cent quarterly dividend to shareholders of record on March 22, 2011. Currently yielding 1.2%, I see management increasing this on an annual basis. When you consider that it had an operating loss of $4.3 million as recently as 2007, it's a testament to the work undertaken to improve profitability. In conjunction with the dividend, LMAT began repurchasing its shares in 2009. In the last two years, it's bought 587,632 shares at an average price of $5.45, 22% lower than its closing price on April 21. If it continues to repurchase its shares at reasonable prices, shareholders will definitely be getting their money's worth.

Vascular Focus
In an effort to develop a more focused business, management has put an emphasis on vascular products, which now account for 71% of overall revenues. In 2010, vascular product sales grew 17% compared to 1% for its endovascular product line. As mentioned earlier, the company will make bolt-on acquisitions when they make sense. Last November, it paid $2.8 million for Angiotech Pharmaceutical's Lifespan vascular graft business and $1.2 million to Edwards Lifesciences (NYSE:EW), Lifespan's former distributor for inventory, in exchange for an orderly transition in Europe and Japan where Lifespan derives most of its $1.7 million in annual revenue. By 2012, Lifespan should make a positive contribution to profitability. Being a niche player makes sense to me because it's easier to train your sales force. This should pay dividends in the years to come.

Bottom Line
LeMaitre Vascular's operating margins have increased in just three years to be comparable with peers such as Kensey Nash (Nasdaq:KNSY) and Vascular Solutions (Nasdaq:VASC). Only a public company since 2006, it's building a good track record of performance. Its future is bright indeed. (For related reading, also take a look at Measuring The Medicine Makers.)

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