Integra LifeSciences Holdings Corp. (NASDAQ: IART) has not reacted to a very positive analyst call, but this is also a call that falls outside of most analyst screens. Argus reiterated its Buy rating and has a $58 post-split target price. Argus is not listed in the Thomson Reuters universe for the upside because it is independent research rather than sell-side research.

What matters here is that this $58 target is $3 higher than highest official analyst target price on Wall Street. Integra’s implied upside in this call is nearly 40%.

Argus likes Integra’s strong growth prospects and its ability to execute on acquisition and mergers that help move the company’s needle on growth in revenue and earnings. On that front, Integra closed on the acquisition of Derma Sciences and has made a binding offer to acquire the Johnson & Johnson Codman Neurosurgery business during the first quarter of 2017. Argus believes that the two acquisitions could add more than $400 million in annual sales.

Also a focus of the report was that Integra is launching new products in the first half of 2017. One is for a tissue ablation system for neurosurgery and a reverse-shoulder implant.

Argus said in its report:

The Codman acquisition will add neurosurgery products and expand distribution channels and sales reps in overseas markets. Integra has been very clear on its intent to grow its overseas sales and this deal will provide the scale to reach that objective… Given the closing late in the first quarter of 2017, the Derma acquisition is expected to be $0.03 dilutive to EPS in 2017 and add about $65 million in revenue. The (Codman) deal is expected to be $0.22 accretive to EPS in the first year after the close. This transaction is expected to close in the fourth quarter of 2017.

Argus talked about the guidance for 2017, including the Derma Sciences acquisition (closed in March). The report showed that Integra expects adjusted earnings of $1.88 to $1.94 per share (growth of 9.1% over 2016) and expects revenue of $1.12 billion to $1.14 billion (growth of 7.0% to 8.5%). The view is that guidance does not include the post-closing impact of the Codman acquisition. Based on the updated guidance, it lowered its 2017 estimate for adjusted earnings to $1.94 from $1.99 per share to reflect the dilutive impact of the Derma Sciences acquisition. The new estimate is $2.22 for 2018.

The valuation Integra is that it trades at 19.1 times the Argus 2018 per-share earnings estimate, which is above the average of 16.1 for peers in the firm’s med-tech coverage universe. Argus believes that its premium valuation is warranted based on its strong sales growth, steady flow of new products and rising margins. Argus views Integra’s tissue regeneration products and instruments for neurosurgery as solid growth drivers.

After closing at $42.13 on Friday, Integra LifeSciences traded down 0.6% at $41.86 on Monday. Its 52-week trading range is $40.77 to $88.86, and the consensus analyst target price is $48.54. The equity has a $3.13 billion market capitalization.

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