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Avedro (AVDR) Hits a 52-Week High on Solid Growth Prospects

Zacks Equity Research

On May 20, shares of Avedro, Inc. AVDR scaled a new 52-week high of $20.00, closing the session marginally lower at $18.98. The stock hit the high following impressive first-quarter 2019 earnings results.

Avedro had a great run on the bourses in the past year. The stock has returned 54.4% compared with the S&P 500 index’s rise of 4.3%. The return is also higher than the broader industry’s rally of 0.9%.

Considering this, one may expect this commercial-stage ophthalmic medical technology company to scale new highs in the upcoming quarters. Further, the company has average positive earnings surprise of 0.99% for the trailing four quarters.

The estimate revision trend for the current year looks impressive. In the past month, four estimates have moved upward, with no movement in the opposite direction.

Factors Driving Avedro

Let’s take a look at the possible growth propellers.

Surging Revenues: In the first quarter of 2019, Avedro witnessed a 70% year-over-year rise in revenues.The upside was primarily driven by an increase in both U.S. and non-U.S. revenues.

Expanding Margins: In the last reported quarter, gross margin expanded to 74% from the prior-year 49.2%.

Revenue View Narrowed: The market is upbeat about Avedro’s narrowed 2019 revenue guidance to $37-$40 million from the earlier $36-$40 million. The Zacks Consensus Estimate for the metric is pegged at $38.8 million, which is within the guided range.

Progress in Epi-On Clinical Trial: Recently, the company announced the completition of patient enrollment under a pivotal Phase 3 clinical trial to assess the safety and efficiency of an epithelium-on (Epi-On) corneal cross-linking procedure for the treatment of progressive keratoconus.

Reimbursement Milestone: Avedro recently achieved a significant milestone with respect to product reimbursement. According to the company, four new health insurance providers — Providence Health Plan in the Pacific Northwest, Health New England, HealthPartners Minnesota and Public Employees Health Plan (PEHP) in Utah — have declared positive coverage policies for Avedro’s FDA-cleared corneal cross-linking procedure. This reached the total number of commercial plans covering the KXL system and its associated Photrexa drug formulations to more than 65. Additionally, the plans bring the total payer coverage in the United States to more than 180 million. This should keep driving the company’s customer base.

Implementation of J-code: In January 2019, the product-specific J code, J2787, for Photrexa Viscous (riboflavin 5’-phosphate in 20% dextran ophthalmic solution) and Photrexa (riboflavin 5’-phosphate ophthalmic solution) came into effect. Management expects the J-code to have a positive impact over the long term as insurance companies will reimburse customers for the cost of Photrexa and Photrexa viscous drugs.

All these factors have lifted the Avedro stock to a new 52-week high.

Zacks Rank and Stocks to Consider

Avedro currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader medical space are Masimo Corporation MASI, CONMED CNMD, DENTSPLY SIRONA XRAY, each currently carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Masimo’s long-term earnings growth rate is projected at 16.1%

CONMED’s long-term earnings growth rate is expected at 13.3%.

DENTSPLY SIRONA’s long-term earnings growth rate is predicted at 11.5%.

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