CNBC’s Jim Cramer reviewed Medline, a medical supplies giant that made its market debut Wednesday, saying that he’d wait for a pullback to buy the stock after shares soared more than 41%.
“We had the largest IPO in over four years today, and it generally went pretty darn well,” Cramer said. “In fact, it went so well that Medline looks a little too expensive for me.”
Medline was the biggest IPO of the year globally. The company managed to raise $6.26 billion, and the stock opened up $35, up from its initial pricing of $29.
Cramer looked at Medline’s business strategy, noting the way that CEO Jim Boyle described the company as a sort of Costco for healthcare, with a membership model and its own branded products. The company’s revenue is split fairly evenly between selling its own surgical products as well as handling supply chain for the industry as a whole, Cramer pointed out. Medline has put up solid revenue growth over the past few years and is solidly profitable, he continued.
While manageable, Medline’s balance sheet isn’t ideal, Cramer said, noting that the company needs to pay down debt. He also pointed out that a majority of shareholders are private equity firms who bought the company before the IPO, and indicating he’s somewhat wary that these entities wield most of the voting power. The private equity firms will want to “ring the register,” sooner or later, Cramer continued, and cashing out will put pressure on the stock. While he said the selling likely won’t be an issue in the near future, he said “longer-term, there’s a ceiling on this one until the private equity guys have fully liquidated their positions.”
Even though Cramer likes the company, he said he’d wait until the stock comes down to $29 or $30, as he doesn’t want to “chase it after this huge first-day move.”
“Given the current share price, the stock’s trading at something like 45 times my back of the envelope earnings estimates,” Cramer said, which he deemed a lot for “a company with low double digit revenue growth.”
Medline did not immediately respond to request for comment.
