Zacks Investment Research downgraded shares of Electromed Inc (ELMD) from OUTPERFORM to NEUTRAL on February 18, 2013, with a target price of $2.00.
The slower than anticipated pace in net growth of the sales force has hampered revenue growth and resulted in the last 5 quarters missing our estimates. Management's plan continues to include growing their sales force which remains one of the catalysts for sales growth. To help facilitate this, along with implementing other growth strategies ELMD recently brought on a Director of Sales, hired a permanent CEO and added an International sales director. While we had hoped for a quicker resolution to the negative sales growth, we now think this may take some more time. We remain of the mindset that with a proper strategy and execution, ELMD is an attractive growth story. The recent changes to our model and related effect on valuation has prompted us to move our recommendation from Outperform to Neutral. We think it's also worth noting that the shares continue to trade below book value (book value = ~$1.80/share) which should provide further downside protection in our opinion.
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