Axonics (AXNX): A Significantly Undervalued Gem in the Medical Technology Sector?
With a daily gain of 4.11% and a three-month gain of 12.63%, Axonics Inc (NASDAQ:AXNX) has sparked interest among investors. However, with a reported Loss Per Share of 0.67, the question arises: is Axonics significantly undervalued? This article delves into the valuation analysis of Axonics, providing an in-depth look at its financial performance and future prospects.
A Snapshot of Axonics Inc (NASDAQ:AXNX)
Axonics Inc is a US-based medical technology company that specializes in the design, development, and commercialization of innovative and minimally invasive sacral neuromodulation (SNM) solutions. Primarily used to treat patients with overactive bladder, fecal incontinence, and urinary retention, the company's r-SNM System delivers mild electrical pulses to the targeted sacral nerve to reduce symptoms.
With a current stock price of $60.52 and a market cap of $3.10 billion, Axonics seems to be significantly undervalued when compared to its GF Value of $102.28. The following analysis delves deeper into the company's valuation, combining financial assessment with essential company details.
Understanding the GF Value of Axonics
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be trading.
If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $60.52 per share, Axonics appears to be significantly undervalued, indicating that the long-term return of its stock is likely to be much higher than its business growth.
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Evaluating Axonics' Financial Strength
Before investing, it's crucial to assess the financial strength of a company. Investing in companies with poor financial strength can lead to a higher risk of permanent loss. The cash-to-debt ratio and interest coverage are great indicators of a company's financial strength.
Axonics has a cash-to-debt ratio of 111.7, outperforming 85.25% of 834 companies in the Medical Devices & Instruments industry. With an overall financial strength score of 8 out of 10, Axonics demonstrates strong financial health.
Profitability and Growth of Axonics
Investing in profitable companies, especially those with consistent profitability over the long term, is typically less risky. A company with high profit margins is generally a safer investment than one with low profit margins. However, Axonics has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $319.90 million and a Loss Per Share of $0.67. Its operating margin is -5.71%, which ranks lower than 55.1% of 824 companies in the Medical Devices & Instruments industry. Overall, GuruFocus ranks Axonics' profitability at 3 out of 10, indicating poor profitability.
Growth is a crucial factor in the valuation of a company. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Axonics is 129.7%, which ranks better than 96.82% of 724 companies in the Medical Devices & Instruments industry. The 3-year average EBITDA growth rate is 27.2%, which ranks better than 73.29% of 730 companies in the same industry.
Another method of determining the profitability of a company is to compare its return on invested capital (ROIC) to the weighted average cost of capital (WACC). ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Axonics's ROIC is -6.01, and its WACC is 7.75.
Conclusion
In summary, the stock of Axonics (NASDAQ:AXNX) appears to be significantly undervalued. The company's financial condition is strong, but its profitability is poor. Its growth ranks better than 73.29% of 730 companies in the Medical Devices & Instruments industry. To learn more about Axonics stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
