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Are These 3 Medical Stocks a Safe Investment?

The future of the medical devices and equipment industry looks buoyant, given rising chronic conditions and the adoption of advanced technology. Given this backdrop, would it be prudent for investors to buy medical stocks, Terumo Corporation (TRUMY), Haemonetics Corp. (HAE), and MiMedx Group (MDXG)? Read more to find out…

The medical devices and equipment industry is also instrumental in engineering and manufacturing several types of devices and equipment used by healthcare professionals, along with its contribution to the improvement in the quality of life for patients, which should keep its prospects buoyed for the long term.

In this context, I have discussed the fundamentals of three medical stocks: Terumo Corporation (TRUMY), Haemonetics Corporation (HAE), and MiMedx Group, Inc. (MDXG), to help you determine if they are safe investments.

As chronic diseases continue to rise, healthcare agencies are prioritizing early diagnosis and treatment. This trend is driving an increase in the number of patients undergoing diagnostic and surgical procedures, which, in turn, is driving the demand for medical devices.

Several leading companies are investing heavily in R&D to develop technologically advanced equipment to meet this growing demand. BlueWeave Consulting’s recent study shows that the global drug discovery services market is projected to grow at a CAGR of 15.2%, reaching $52.8 billion by 2029.

On top of it, the global medical equipment market is expected to hit $922.39 billion by 2027, growing at a CAGR of 7.3%. Moreover, the medical industry is on its path to reinventing itself by repositioning its future competitive landscape, improving traditional business models by integrating superior technology, and improving its value chain.

As the focus of the industry continues building back supply chain resiliency, increased focus on ESG norms, and adoption of AI to ensure precision in diagnostics and surgery, KPMG, a leading research and advisory firm, predicts global medical device annual sales to rise by over 5% a year and reach nearly $800 billion by 2030, indicating increased demand of devices in the emerging markets.

Given the robust growth projections, it could be worth considering fundamentally robust medical stocks TRUMY, HAE, and MDXG for your portfolio. Let us evaluate the fundamentals of the featured stocks in detail.

Terumo Corporation (TRUMY)

TRUMY, headquartered in Tokyo, Japan, manufactures and sells medical products and equipment globally. The company operates through three segments: Cardiac and Vascular Company; Medical Care Solutions Company; and Blood and Cell Technologies Company.

On July 4, TRUMY’s subsidiary, Terumo Aortic, received approval from the Japanese Pharmaceuticals and Medical Devices Agency (PMDA) for the commercial sale of the Thoraflex Hybrid Frozen Elephant Trunk (FET) device in Japan to treat patients with complex aortic arch disease. This innovative hybrid device is expected to enable the company to serve its patients better and add to its bottom line.

On June 27, MicroVention, Inc., a global neurovascular company and a wholly owned subsidiary of TRUMY, launched the ERIC Retrieval Device commercially in the United States to treat ischemic stroke. The launch of this product is expected to strengthen the company’s stroke solutions portfolio and help boost its overall revenues.

For the fiscal year ended March 31, 2023, TRUMY’s revenues increased 16.6% year-over-year to ¥820.21 billion ($5.88 billion), while its gross profit rose 13% from the year-ago value to ¥417.37 billion ($2.99 billion). Its operating profit grew marginally from the prior-year quarter to ¥117.33 billion ($840.78 million).

The company’s profit for the year and EPS also increased marginally year-over-year to ¥89.32 billion ($640.09 million) and ¥118.95, respectively. In addition, its total assets improved by 8.7% year-over-year to ¥1.60 trillion ($11.48 billion).

Analysts expect TRUMY’s revenue for the fiscal first quarter (ended June 30, 2023) to increase 4.1% year-over-year to $1.52 billion. It is expected to reach $6.29 billion, registering an impressive year-over-year growth of 142.4%. Moreover, it topped the consensus revenue estimates in each of the trailing four quarters.

The stock has gained 12.9% year-to-date to close the last trading session at $31.83.

TRUMY’s POWR Ratings reflect this favorable outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has an A grade for Stability and B for Value. In the 139-stock Medical - Devices & Equipment industry, it is ranked #35. To see additional POWR Ratings for Growth, Momentum, Sentiment, and Quality for TRUMY, click here.

Haemonetics Corporation (HAE)

HAE is a primary healthcare provider offering a suite of innovative medical products and solutions for customers to help them improve patient care and reduce the cost of healthcare. Its technology addresses three medical markets: blood and plasma component collection, the surgical suite, and hospital transfusion services.

On June 22, the company’s NexSys PCS plasma collection system received clearance from the U.S. Food and Drug Administration (FDA) for new advancements. These include a new plasma collection bowl with a patented design that optimizes performance and new Express Plus Technology that reduces procedure time compared to the current donor management software.

Roy Galvin, President of Global Plasma and Blood Center at HAE, said, “With our redesigned bowl and new Express Plus Technology for faster procedure times and enhanced plasma center efficiency, we continue to advance our innovation to lead the industry in reducing cost per liter for collectors and ensuring the best experience for their donors.”

On March 2, HAE introduced Next Generation “Intelligent Control” Software for Cell Saver Elite+ Autotransfusion System. The new technology enables hospitals to recover a patient’s blood during surgical procedures with medium to high blood loss, thus reducing the need for allogeneic transfusions. This breakthrough in patient care is expected to meet the autotransfusion needs of its customers while reducing costs.

HAE’s net revenues improved by 14.9% year-over-year to $304.42 million in the fourth quarter that ended on April 1, 2023, while its gross profit rose 14.6% from the year-ago value to $156.25 million.

During the same period, its adjusted operating income increased 15.8% year-over-year to $53.94 million. The company’s adjusted net income came in at $39.23 million and $0.77 per share, reflecting increases of 17% and 18.5%, respectively, from the prior-year quarter.

The consensus EPS estimate of $0.73 for the first quarter (ended June 30, 2023) represents a 25.6% improvement year-over-year. The consensus revenue estimate of $292.69 million for the about-to-be-reported quarter indicates an 11.9% increase from the prior-year period. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.

HAE’s shares have gained 17.1% over the past nine months and 42.5% over the past year to close the last trading session at $91.99.

HAE’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It has a B grade for Growth, Sentiment, and Quality. Out of 139 stocks in the same industry, it is ranked #7. Click here to see the other ratings of HAE for Value, Momentum, and Stability.

MiMedx Group, Inc. (MDXG)

MDXG develops and distributes placental tissue allografts with patent-protected processes for multiple healthcare sectors. The company is focused on addressing unmet medical needs in the areas of Advanced Wound Care, Surgical Recovery, and osteoarthritis.

On June 20, the company went into a strategic realignment mode to channel its resources into accelerating growth for its Wound & Surgical business.

As part of this realignment, MDXG is suspending all current activities associated with its Knee Osteoarthritis program and is disbanding its Regenerative Medicine business unit, effective immediately. With this move, it aims to improve its future profitability and cash flows.

MDXG’s net sales improved 21.7% year-over-year to $71.67 million in the first quarter (ended March 31, 2023), while its gross profit grew 21% from the year-ago value to $59.26 million.

The company’s adjusted EBITDA came in at $5.54 million compared to an adjusted EBITDA loss of $1.72 million in the same period last year. In addition, its total liabilities of $93.61 million declined by 3.4%, compared to $96.92 million as of December 31, 2022.

Street expects MDXG’s revenue for the second quarter (ended June 30, 2023) to increase 11.9% year-over-year to $74.83 million. Its revenue estimate of $305.99 million for the fiscal year 2023 is expected to register a 14.2% year-over-year growth. Moreover, the company surpassed the revenue estimates in three of the trailing four quarters, which is excellent.

MDXG’s shares have surged 155.1% over the past nine months and 171.6% year-to-date to close the last trading session at $7.55.

It is no surprise that MDXG has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It also has an A grade for Growth and Sentiment and a B for Quality. Within the same industry, it is ranked #6.

In addition to the POWR Ratings we’ve stated above, we also have MDXG’s ratings for Value, Momentum, and Stability. Get all MDXG ratings here.

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TRUMY shares were trading at $30.84 per share on Thursday afternoon, down $0.99 (-3.12%). Year-to-date, TRUMY has gained 9.42%, versus a 19.42% rise in the benchmark S&P 500 index during the same period.

About the Author: Shweta Kumari

Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.


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