ATS Medical, Inc. (ATSI) is one of the leading players in the mechanical heart valve market in the world. While mechanical heart valves are still growing in international markets, demand for this product is declining in the U.S. markets where tissue valves are more in favor.

We believe overseas markets will eventually adopt this trend, as well. Therefore, the company has started increasing its presence in the tissue valve market, and expanding its offering of complementary products has fueled ATS Medical’s growth.

In the fourth quarter, ATS Medical reported a loss of $0.05 per share, worse than the Zacks Consensus Estimate of loss per share of $0.01. Based on the company’s performance, we downgrade the stock to Underperform with a target price of $2.30, based on a price-to-sales ratio of 2.0x our fiscal 2010 sales estimate.Zacks Investment Research