The diversified nature of Canon's business portfolio makes sustained growth difficult, and at the same time, makes comparison to its U.S.-based peers more difficult. Increasing price competition and slowing consumer demand for some of its optical products are causes for concern, as are decreasing profit margins.
We, therefore, maintain a Hold rating to reflect the stock's full valuation and set our six-month price target to $53. This price is based on a P/E multiple of 13.5x our EPADR estimate of $3.93 for 2008, a premium to the industry mean and median.
Hold Interactive Data on Valuation
Interactive Data Corporation (IDC) has shown growth in its core Pricing and Reference Data and eSignal businesses, as it successfully adds to its offerings and integrates acquisitions. A healthy cash flow has allowed it to return cash to shareholders and repurchase stock. However, recent disruptions in the credit markets could constrain spending within its customer base, and the stock is trading at a relatively high valuation.
For the full year 2008, management reiterated its previous guidance, which called for revenue growth in the range of 7% to 9%, income from operations in the range of 9% to 11%, and effective tax rate in the 36% to 38% range. This will result in the net income growth of 3% to 6%. Capital expenditures for 2008 are expected in the $45 million to $47 million range.
Shares of Interactive Data are currently trading at 20.6x our 2008 earnings estimate of $1.34. This multiple represents a discount to industry mean and a premium to industry median. Though we are encouraged by recent result, we still believe that there is limited upside to the stock at current levels given the company's dependence on acquisitions.
Moreover, we believe its majority ownership by Pearson will limit upside to its valuation. We, therefore, reiterate our Hold recommendation and set our price target at $28.50, which is based on a multiple of 21.3x 2008 EPS estimate.
Amag Pharma: Good Entry Point
Amag Pharmaceuticals, Inc. (AMAG) develops super-paramagnetic iron oxide nanoparticles for use in pharmaceutical products. The company's focus is on developing IV iron replacement therapy for anemia in chronic kidney disease and imaging agent to aid in diagnosis.
We are optimistic about the company's key product candidate, Ferumoxytol, for anemia in chronic kidney disease. The company filed the NDA for the drug in December 2007 and we expect the FDA approval to come in October 2008. Clinical data in over 1,700 patients indicate an excellent safety profile for the drug with lower incidents of heart problems.
We maintain our Buy rating on the shares of Amag with a target price of $70 based on the drug's safety and efficacy profile, strong cash position, cheap valuation and potential for label expansion.
