Olympus Corp.

The stable rating outlook reflects our expectation that Olympus' ratio of debt to EBITDA will generally stay at or below 1.5x in the coming year or two, even as the company steps up growth investments. We also believe its EBITDA margin will steadily improve toward 20% or above as it continues to dominate the gastrointestinal endoscope field and moderately expands its share in the therapeutic solutions market. We may consider upgrading Olympus if it maintains debt to EBITDA at about 1x while strengthening its medical device business and we determine that it is building a solid record of compliance with regulations. Specifically, the company would have to avoid becoming subject to regulatory penalties that exceed industry norms, and there would

...Olympus Corp. can maintain its strong competitiveness in its endoscopic solutions business. The company has long held a 70% share of the global market for gastrointestinal endoscopes. It differentiates these devices using the unique imaging technologies it developed for digital cameras. In addition to its technological advantages, its close ties with health care professionals and the post-sales support system it provides serve as barriers to market entrants, benefiting its competitiveness. Its therapeutic solutions business, another area of focus, is likely to only moderately strengthen its earning power. The competition with more established medical device companies overseas is fierce. The company's products in this area, such as endotherapy products and energy devices, are highly compatible with its endoscopes. But expanding market share will be challenging, as many rivals have strong financing and development capabilities, as well as longstanding, established relationships with customers...

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