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No. of Recommendations: 1
We expect that ZEVEX will continue growing its business, while increasing revenues and earnings. The
Company is in the process of expanding its enteral nutrition delivery business into the European market. There is
great potential for expansion in the functional capacity testing and musculoskeletal evaluation market, which is
the business of the ZEVEX' JTech Medical Industries subsidiary, and the Company is poised to take advantage of
that opportunity. ZEVEX' CEO, Dave McNally, is actively seeking profitable product lines and companies for
potential acquisition.
We believe that ZEVEX will post earnings of $ 0.46 per share in 2000 and $ 0.57 per share in 2001. ZEVEX'
continued expansion of its proprietary businesses will increase revenues and earnings and help to safeguard the
Company from the unpredictable fluctuations that are inherent in the contract manufacturing business. Within its
contract manufacturing business, ZEVEX achieves relatively high margins by focusing on ultrasonic and
optoelectronic technologies. ZEVEX is currently trading at a multiple of 0.6X sales, which is below its peer
group average of 0.9X sales.
We believe that ZEVEX has successfully established itself in three different niches within the huge medical
device industry. In each of these niches—the enteral nutrition delivery business, the functional capacity testing
and musculoskeletal evaluation business, and the contract manufacturing business—the Company has achieved
technical expertise and is aggressively striving to increase market share. Over the past few years, ZEVEX has
been experiencing growth in both earnings and revenues, and we expect this growth to continue. Thus we believe
that ZEVEX should trade at 0.9X sales, on par with its peer group, rather than at its current multiple of 0.6X sales,
and have set our 15-month target price at $9.25.

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