FYI
Masimo (MASI) shares soared 3.3% in the last trading session to close at $139.43. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 2.1% gain over the past four weeks.
The company's plan to spin-off its consumer business is likely to be the key factor for the surge in share prices. Investors cheered the news as the spin-off may improve Masimo's business performance going forward.
The consumer business includes the former Sound United, its Stork baby monitor and Freedom smartwatch and bands. Masimo will retain its professional health care and telehealth products, which include noninvasive monitoring products for patients in hospitals.
Last year, Masimo's non-health care products brought in $772.6 million in sales. That narrowly beat expectations for $770.7 million, FactSet shows.
Needham's Matson notes that Sound United had annual sales of about $900 million at the time Masimo acquired it. Then, it had a 14% margin on EBITDA — or earnings before interest, taxes, depreciation and amortization — but that's likely contracted alongside sales.