Orchid Cellmark Looks to Blossom - Analyst Blog
Orchid Cellmark Inc. (
ORCH) is a leading provider of DNA testing services for forensic, human identity and agricultural applications in the U.S. and the U.K. The company is also the world's largest provider of scrapie susceptibility genotyping. Orchid Cellmark is now leveraging its expertise in DNA testing to enter into new markets like pork traceability, immigration testing and security applications.
Recent market conditions have left the stock trading close to the 52-week low. We expect the company to benefit from the accretive effect of the ReliaGene acquisition in the second half of 2008. Additionally, revenue from the mega tender in the U.K. will positively impact the company's topline in 2009.
As such, we maintain our Buy rating on the stock with a revised target price of $5.00. We arrive at our target price by applying a diagnostics industry P/E multiple of 35 x to our 2011 EPS of $0.33 million, discounted back at 30% for three years.
Maharathi Basu contributed to the report.
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