OrthoPediatrics (KIDS): Pediatric Ortho Leader in an Underpenetrated Market with Improving Profitability and Valuation Upside

, an analyst from TD Cowen, has initiated a new Buy rating on OrthoPediatrics (KIDS).

TD Cowen has given his Buy rating due to a combination of factors that underscore OrthoPediatrics’ unique position and attractive financial outlook. The firm views KIDS as the clear leader in pediatric orthopedics, operating in a sizable and underpenetrated market of roughly $3 billion in the U.S., with a similarly large international opportunity. Unlike competitors that adapt adult implants for children, OrthoPediatrics is singularly focused on pediatric patients, which TD Cowen believes creates a durable competitive moat and supports continued share gains across trauma, deformity, and scoliosis segments.
TD Cowen’s rating is also based on the company’s strong historical and prospective growth profile alongside improving profitability. Despite some quarter-to-quarter volatility, KIDS has delivered robust multi-year revenue growth and is expected to sustain double-digit top-line expansion, with potential to trend toward the mid-teens. At the same time, management’s emphasis on margin improvement and cash flow is moving the business toward near-term profitability and free cash flow breakeven. TD Cowen notes that the current valuation multiple is depressed relative both to KIDS’ own history and to peers, and sees room for EV/Sales multiple expansion to about 2.2x, which supports their $23 price target and underpins the Buy recommendation.

In another report released on January 13, Lake Street also reiterated a Buy rating on the stock with a $34.00 price target.