Reviewed by CNBC’s Jim Cramer medlinethe medical products giant that made its market debut on Wednesday, said it would wait for the stock price to fall before buying shares after its stock price soared more than 41%.
“Today we had the largest IPO in over four years, and overall it went very well,” Kramer said. “In fact, it worked so well that Medline seems a little too expensive for me.”
Medline became the year’s largest IPO globally. The company successfully raised $6.26 billion, and the stock price rose $35 from its opening price of $29.
Kramer looked at Medline’s business strategy, noting that CEO Jim Boyle described the company as a type of company. costco A healthcare service with a membership model and proprietary branded products. The company’s revenue is split almost evenly between selling its own surgical products and handling the industry-wide supply chain, Kramer noted. He continued that Medline has experienced solid revenue growth over the past several years and has a solid profit margin.
Kramer said Medline’s balance sheet is manageable but not ideal, noting the company needs to pay down debt. He also pointed out that the majority of shareholders are private equity firms that bought the company before its IPO, suggesting he is somewhat wary that these companies control most of the voting rights. Private equity firms will want to “ring the registers” sooner or later, Cramer continued, and cashing out will put pressure on stock prices. He said sales were unlikely to be an issue in the near term, but added: “Longer term, there is a cap until private equity players fully liquidate their positions.”
Cramer said he likes the company but will wait until the stock drops to $29 or $30 because he doesn’t want to “chase after this big move on the first day.”
“Given the current price, the stock is trading at about 45 times my marginal earnings estimate,” Kramer said, which he thought was a significant amount for “a company with low double-digit sales growth.”
Medline did not immediately respond to a request for comment.
