Since the change in political power in the United States, it has been quite a tumultuous phase for MedTech. Things started getting dramatic since President Trump started forging ahead with his plans to repeal Obamacare. After a series of futile attempts, the Republicans resorted to a “skinny repeal” of Obamacare which failed as well.
Political Uncertainty Hits MedTech
Not willing to give up, the Republicans are back with the latest Graham-Cassidy bill targeting the termination of the Obamacare Act and focusing on reduced federal spending on healthcare. The Trump administration is not leaving any stone unturned to garner support for the latest GOP bill.
Moreover, the industry is looking forward to end the unpopular Cadillac tax (40% excise tax on high-cost healthcare plans). Also, there is high possibility that the Medical Device fraternity will be exempt from the 2.3% medical device tax. In this regard, the Trump administration has successfully delayed the Cadillac tax till 2026.
MedTech Grapples With Regulatory Changes
Many economists believe that changes in MedTech-related regulations might escalate the regulatory burden. The recent regulatory changes include Trump’s signing of the FDA Reauthorization Act (FDARA) into law whereby the bill extends through fiscal 2022 and revises FDA user fees for medical devices. Complicating the situation, the Centers for Medicare and Medicaid Services (“CMS”) issued a proposed rule whereby beginning October, it intends to cut more than $43 billion over a period of 10 years to Medicaid disproportionate share hospital (“DSH”) allotments.
Some MedTech players in Capitol Hill are concerned about the rising regulatory burdens which might result in declining research and development spending. This might further impede innovation rates in the MedTech space.
They also believe that the regulatory pressure is also weakening the barriers to entry in the MedTech space, thereby paving the way for increased competition in the core markets.
How to Spot Underperforming Stocks?
Its prudent to dump underperforming stocks in time or else it might hurt your portfolio returns. Also, finding such stocks is no mean feat. However, our Zacks Stock Screener can help steer clear of such stocks.
Our Screening Parameters
In order to help investors identify the stocks to be avoided in the MedTech space, we have used the Zacks Stock Screener.
First, we have shortlisted MedTech stocks with a VGM of D or F. Under the Zack Style Score system, VGM stands for: V – Value, G – Growth and M – Momentum. The score is simply a weighted combination of these parameters and is a comprehensive tool that allows investors to filter through the standard scoring system and pick the winning stocks.
Second, we have picked stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell).
Here are the stocks that met all criteria:
Invacare Corporation IVC:Headquartered in Elyria, OH, Invacare and its subsidiaries designs, manufactures and markets medical equipment for use in home health care, retail, and extended care markets globally. The company presently carries a Zacks Rank #4 and has a VGM Score of F.
Further, the Zacks Consensus Estimate for 2017 loss per share has widened by 17.5% over the last 60 days, thanks to a downward revision by an analyst. Moreover, the stock has gained only 20.3% year to date underperforming the broader industry’s 16.1% gain.
Invacare has reported average negative earnings surprise of 44.25% in the trailing four quarters partly due to the company’s divestiture of Garden City Medical, Inc. (GCM), weakness in the end markets and closure of the company’s manufacturing unit in China. Moreover, the company exited the last reported second-quarter 2017 with a decline in year-over-year revenues and wider loss per share. You can see the complete list of today’s Zacks #1 Rank stocks here.
Mesa Laboratories, Inc. MLAB: Headquartered in Lakewood, CO, Mesa Laboratories designs, manufactures, and commercializes disposable products and quality control instruments. The company presently carries a Zacks Rank #5 and has a VGM Score of D.
Further, the Zacks Consensus Estimate for 2017 earnings has moved 7.6% down over the last 60 days, with downward revision by one analyst.
Moreover, the stock has gained 19.2% year to date underperforming the broader industry’s 22.1% gain.
Biocept, Inc. BIOC:Headquartered in San Diego, CA, Biocept is an early stage molecular oncology diagnostics company, which develops and markets proprietary circulating tumor cell (CTC) and circulating tumor DNA assays using a standard blood sample. The company presently carries a Zacks Rank #4 and has a VGM Score of D.
Further, the Zacks Consensus Estimate for fourth-quarter 2017 loss per share has widened 5% over the last 60 days with a downward revision by an analyst.
Moreover, over the last six months the stock has lost 40.7% in contrast to the broader industry’s gain of 5.9%.
Oxford Immunotec Global PLC OXFD: Headquartered in Abingdon, U.K., Oxford Immunotec is a diagnostics company focusing on developing and marketing proprietary tests for immune-regulated conditions. The company presently carries a Zacks Rank #4 and has a VGM Score of D.
Further, the Zacks Consensus Estimate for 2017 loss per share has widened 47.2% over the last 60 days, with two estimates moving south.
Moreover, over the last six months the stock has gained only 0.1% underperforming the broader industry’s gain of 10.4%.
T2 Biosystems, Inc. TTOO: Headquartered in Lexington, MA, T2 Biosystems is an in vitro diagnostics company, developing diagnostic products and product candidates in the United States. The company presently carries a Zacks Rank #4 and has a VGM Score of D.
Further, the Zacks Consensus Estimate for 2017 loss per share has widened 11.4% over the last 90 days.
Moreover, over the last year the stock has lost 29.9% in contrast to the broader industry’s 8% gain.
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