Dougherty Starts Merge Healthcare (MRGE) at Buy; Pure Play In Image Interoperability With Strong Growth Prospects.

Dougherty initiates coverage on Merge Healthcare (NASDAQ: MRGE) with a Buy. PT $8.50.

Dougherty analyst says, "The stock is currently trading at approximately 19x our 2012 adjusted EPS forecast. Since we expect Merge to grow earnings from continuing operations more than 30% per year for the next 3 years and beyond, we believe the stock warrants a multiple of at least 30.0x our 2012 adjusted EPS estimate during the next 12 months. Our $8.50 price target also suggests that investors will be willing to assign 12x our 2012 adjusted EBITDA estimate. On an EV/Adj. EBITDA basis, the stock is currently trading at 8.8x our 2012 adjusted EBITDA forecas."

"MRGE’s valuation multiples are in line with the average multiple of the Healthcare IT universe we track. While Merge’s valuation multiple at our price target is higher than the comparable Healthcare IT universe is today, we believe the premium is justified since MRGE is the only pure-play in and is the leader of an industry expected to show significant growth in coming years."

For more ratings news on Merge Healthcare click here and for the rating history of Merge Healthcare click here.

Shares of Merge Healthcare closed at $5.39 yesterday.

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