Cynosure’s greatest asset is human nature.

Most people love to eat, abhor exercise, but want to look fit. And many don’t want to go under the knife to have fat surgically removed through procedures such as liposuction. For them, Cynosure’s “SculpSure” is like a skinny dream come true. SculpSure uses lasers from the outside to melt fat in half the time of competing treatments and with less pain. Rave reviews and high patient satisfaction rates are prompting more doctors in the $12 billion cosmetic surgery industry to adopt the procedure.

SculpSure is the latest in a long line of treatments from Cynosure (CYNO). It has sold laser treatments for over 25 years and already had a profitable portfolio of tattoo removal, skin rejuvenation and gynecological products before SculpSure came along.

Profits rose 22% in the first half of 2016 and are expected to increase 24% for the year. Fiscal 2017 should usher in 40% growth, as sales to new doctors take off. Although the stock is up 24% year-to-date, we think it could jump another 25% to our $65 target.   

Cynosure’s main customers are dermatologists and plastic surgeons—in the U.S. alone there are 20,000 of these doctors. Cynosure’s data shows that only 9% of these doctors use a noninvasive body-contouring treatment.

Cynosure also sells its aesthetic systems to OB-GYNs as well as primary care physicians and internists. This market is 14 times larger than the specialist market and has been driving growth in demand for Cynosure’s systems.

It is unlikely that general practitioners will adopt the company’s procedures at the same rate as dermatologists or plastic surgeons, but Cynosure’s recent success selling to non-specialist physicians illustrates the huge market potential. Many of these doctors are looking for cash-generating procedures that are easy to administer because lower insurance reimbursements are eroding profits at medical practices. Cynosure’s procedures are mainly paid for out-of-pocket by consumers.

No Love for Love Handles

SculpSure is the world’s first hyperthermic laser treatment (it uses a heating process to melt fat deposits) to remove love handles and belly fat non-invasively. The procedure is superior in many ways to competitor Zeltiq’s Coolsculpting process, which uses a freezing technology.

Coolsculpting was the first to sell a product for less-invasive fat removal; its procedure was approved in 2010. Although the company has sold many systems, the effectiveness of its process has been questioned. Patients complain of hour-long treatments and long painful recoveries with minimal reductions in fat deposits.

SculpSure takes just 25 minutes, lets doctors treat multiple areas simultaneously, requires minimal local anesthesia and has patients up and running almost immediately. Customer satisfaction is above 90%.

Not Just Tummy Tucks

Cynosure is no flash in the pan. The company, which went public in 2005, has been selling cosmetic laser products since 2001. Even before the SculpSure launch last fall, Cynosure was expanding revenue and earnings at a rapid clip.

The company’s flagship system, PicoSure, is used to remove tattoos, sun spots and age spots. Other products include Icon, a laser used to treat acne, scars and stretch marks, and the MonaLisa Touch, a laser therapy for gynecologic health.

Cynosure sells treatment systems to doctors and then enjoys a steady stream of revenue from disposable products that are needed to do the procedure. The SculpSure system has a list price of $150,000, almost 40% higher than the average price for all of its other systems.

Management offers little guidance on earnings, which can be risky for investors. To date, analyst estimates have been conservative with Cynosure, even though the company has beaten estimates an average of 40% the last six quarters. This sets the bar high for expectations, but our model shows the company beating current estimates per share of $1.34 in 2016, $1.88 in 2017 and $2.34 in 2018.

Cynosure has $210 million, or $9 a share, in cash and no debt. Cash flow is strong, with the company generating $16 million of cash in the first half of this year versus a use of $1 million last year.

Our target is based on a mid-20s multiple on 2018 estimates. Although the stock is up 24% year-to-date, we think it could jump another 25%.  

Target: $65