March 2, 2009 - Thoratec Corp. (THOR-NASDAQ) manufactures circulatory support products for use by patients with heart failure. It operates in two segments, Cardiovascular and International Technidyne Corporation (ITC). The Cardiovascular segment develops, manufactures, and markets medical devices used for mechanical circulatory support. It offers Paracorporeal Ventricular Assist Device, an external ventricular assist device for short to mid-term cardiac support; and Implantable Ventricular Assist Device, an implantableblood pump approved for both bridge-to-transplantation and post-cardiotomy myocardial recovery.

The ITC segment designs, develops,manufactures, and markets point-of-care products, including diagnostic test systems that monitor blood coagulation, as well as monitor blood gas/electrolyte, oxygenation, and chemistry status, including total hemoglobin. This segment also offers incision products to obtain patient's blood sample for diagnostic testing and screening for platelet function.

It sells its products to the hospital point-of-care market; the alternate site point-of-care market comprising physician's offices, long-term care facilities, clinics, visiting nurse associations, and home healthcare companies; and distributors. The company markets its products through direct sales force and distributors in the United States and internationally. Thoratec was founded in 1976 and is headquartered in Pleasanton, California.

Sales have gone from $214.1 million in 2006 to $313.6 million in 2008. This year, analysts see $353.36 million and $417.74 million in 2010. For the next 5 years, analysts predict average annual revenue growth of 15%.

While that's impressive, especially for the economic times, even more noteworthy is the earnings growth projected. Over the next 5 years, analysts have a consensus view of 23% a year, with some suggesting as much as 47%. There are 13 analysts covering the company. Earnings were 9 cents a share in 2006, then jumped to 33 cents, followed by 61 cents and this year, look for 71 cents. In 2010, the number is 89 cents. The first quarter results will be out in April and estimates are for 15 cents, almost double the 8 cents of last year's same quarter. In June, expect 18 cents, a little below the 20 cents of last year's June quarter.

The company finished 2008 with a bang. Sales were up 34% in the fourth quarter compared to the same quarter in 2007. The Cardiovascular group showed an increase of 48% in its sales for the quarter. Net profits were up 45% for the three months.

The company now has 55 HeartMate II centers, having added 12 in the last quarter of the year. The HeartMate is one of the strongest product lines for THOR. Expect continued healthy demand for HeartMate products, domestically and internationally (28% of 2007 sales). The company is working on new peripherals for HeartMate to expand its market, but there are costs associated with the R&D that will affect the bottom line.

The company is selling its core products in Europe and wants to expand its presence there. It's also working on entering the Japanese market and is currently doing the exploratory effort required. The HeartMate II and its peripherals should continue to be the main driver of sales for the next several years in all markets, domestic and international, as the demand for it shows no signs of weakness.

More numbers: Market Cap is $1.3 billion. Price to sales is 4.09. Price to book is 2.91. Operating margin in the last 12 months was 8.21%; Profit margin was 7.19%. Return on equity was 5.37%. Cash in the bank is $224.88 million for $4.01 a share. Total debt is $143.75 million. Book Value is $7.87. There are 56.07 million shares outstanding and a float of 49.57 million. Insiders own 12.65% of the stock. There's no dividend.

This is a volatile stock, having hit a low of $12.92 in March of last year, then running to $33.40 in early January of this one. But that wasn't straight up. It took a quick dip in October and November of last year. Now it's trading up again, at $23. Its valuations are fairly high at this level.

Thoratec has a lot of good going for it, not the least of which is the ability to grow in an economy that is definitely not. It has plenty of cash. Sales and profits are increasing at notable rates. Dig a little deeper into this medical device company for more details. Just keep the volatility of the last year in mind if you decide to buy.

- Company Web site: www.thoratec.com

- Ted Allrich