How do you know investors don't like tariffs?
Forget looking at the S&P 500. Instead, consider the 52-week highs and lows on three separate occasions: Nov. 6, 2024, the day after Trump was elected; Dec. 1, 2024, just days after Trump announced his plans for a 25% tariff on Canadian and Mexican goods entering the U.S., and March 4, 2025, the day the actual tariffs kicked in.
Nov. 6, 2024: 652 52-week highs / 48 52-week lows
Dec. 1, 2024: 145 52-week highs / 22 52-week lows
March 4, 2025: 52 52-week highs / 279 52-week lows
In the four months since Trump became president, the S&P 500 has essentially gone sideways after making a big initial surge from investor enthusiasm. Fast-forward to today, and enthusiasm is hardly the word you would use to describe market conditions.
More aptly, things are a mess and likely to worsen. Sure, Commerce Secretary Howard Lutnick has offered Canada and Mexico a carrot, suggesting that the parties can find a compromise.
As a Canadian, I’m still in the dollar-for-dollar retaliation camp, so if Trump agrees to cut the tariff percentage, but not take it off the table, both sides will continue to suffer.
But I digress.
Among the 279 52-week lows is Delaware-based orthopedic medical devices specialist Enovis (ENOV). Founded as Colfax Corp. in 1995, it was owned by Steven and Mitchell Rales, the same people behind Danaher (DHR).
This is the stock’s 41st 52-week low in the past 12 months. While its business is imperfect, some argue that its share price has been unnecessarily beaten down.
That makes it an excellent contrarian stock to buy.
Why Its Shares Keep Falling
Enovis stock is down 41% over the past 12 months and 62% from its November 2021 all-time high. The question is why?
MarketWatch's analyst coverage shows that 11 cover ENOV, with 10 rating it a Buy (91%) and a $63 target price, 72% higher than where it’s currently trading. So, it’s not the analysts raining on the company’s parade.
Enovis reported Q4 2024 results at the end of February. They were reasonably good with 6% organic sales growth (7% excluding currency), including 10% comparable growth for its Global Reconstructive segment and 3% for Protection & Recovery.
On the bottom line, it earned $55.0 million, or $0.98 a share in the quarter, 26.4% higher than $43.5 million, or $0.79. The 98-cent earnings per share was 7% higher than Wall Street’s estimate.
The midpoint guidance for 2025 calls for revenue of $2.21 billion, which translates to 6.25% organic growth. Adjusted earnings per share will be $3.18, 12% higher than in 2024. That’s right on the analyst estimate.
“Our performance in 2024 marks a transformational year for the Company as we executed our integration plans and solidified our ability to deliver sustainable high-single-digit organic growth and year-over-year margin expansion,” said Matt Trerotola, Chief Executive Officer of Enovis.
The integration Trerotola speaks of is the acquisition of Lima, a privately-owned Italian medtech, for $866 million, with 87% in cash and 13% in stock. The deal closed on Jan. 3, 2024. The acquisition adds to its extremities business in 2025.
The only negative item in the financials is the $645 million non-cash goodwill impairment charge, which reflects the fall in its market cap relative to the carrying value of its two reporting segments.
It is what it is.
The company's one-year chart showed a gradual decline from January through November before recovering somewhat through most of February. Since reporting on Feb. 26, its shares have lost about 15% of their value.
The only thing that stands out is the announcement at the same time of its CEO transition. Matt Trerotola has served as CEO since July 2015. Before that, he worked in senior management at Danaher. However, its share price hasn’t done much over the nearly 10 years as CEO.
A new set of eyes is very good for the company and stock.
Why Buy Enovis?
From a valuation perspective, Enovis stock trades at 11.5x its 2025 EPS estimate, and 10.0x the 2026 analyst EPS estimate of $3.66.
If you look at the historical price-to-next-12-months EPS multiple since September 2020, the lowest it’s gotten, according to S&P Global Market Intelligence, is 14.6x at the end of 2024. The highest was 25.2x in March 2023.
From a valuation perspective, Enovis stock is cheap at current prices. However, volatility will continue to affect all stocks in 2025, so attempting to time the bottom involves risk.
The Dec. 19 $70 call has an ask price of $1.70, or 4.6% of its March 4 closing price. With a delta of 0.12505, you can double your money by selling the call before expiration if it appreciates by $13.59 (37%).
While there is almost no chance it will be in the money in 10 months, the risk/reward proposition is reasonable. The only downside is that you can only buy one call, let alone 10. The open interest is just 10.
If you’re a buy-and-hold investor, you might buy at current prices, and buy a long put in the low-to-mid $30s. However, again, the problem is volume. Its 30-day average is just 453.
