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Here's Why Investors Should Buy Surmodics (SRDX) Stock Now

Zacks Equity Research

Surmodics, Inc. SRDX is one of the top players in the MedTech space. The company’s impressive performance in first-quarter fiscal 2019 and consistent focus on Research and Development (R&D) are working in favor of the stock.

In a year’s time, this Zacks Rank #1 (Strong Buy) stock has skyrocketed 106.9% compared with the industry’s 5.9% growth. The current level is also significantly higher than the S&P 500’s 1.6% increase.

What’s Favoring Surmodics?

Surmodics’ solid efforts to improve its research and development stature have been a key growth driver. Also, the company’s whole product solutions pipeline and sirolimus-based below-the-knee DCB program deserve a mention here.

Meanwhile, Surmodics has been making progress using its internally developed .014 balloon platform. The company has also been working through the preclinical studies for the data package that will be used to determine the readiness for first-in-human clinical trial. It is expected to make continued progress throughout the remainder of fiscal 2019.

Furthermore, the company has made dramatic progress in developing its AV fistula drug-coated balloon. In the non-drug delivery R&D pipeline, Surmodics also got the FDA clearance for its Telemark support microcatheter.

In first-quarter fiscal 2019, R&D expenses shot up 46.7% year over year. Considering the company’s strength in the R&D prospects, Surmodics has long-term goals of generating double-digit top-line growth by the end of calendar 2019.

Markedly, Surmodics’ performance continues to be driven by its In Vitro Diagnostics (IVD) unit. For over 35 years, the segment has been a leader in developing an ELISA/EIA, immunoblot/western blot, line assay or microarray. In the first quarter of fiscal 2019, sales at IVD increased 17.6%, reflecting strong sales growth of clinical components used in diagnostic tests and microarray slides slide. Operating income at the segment registered a robust growth of 47% from the year-ago quarter’s level.

Which Way Are Estimates Treading?

The Zacks Consensus Estimate for fiscal 2019 revenues is pegged at $96.7 million, reflecting an 18.9% growth. The same for adjusted earnings is pinned at 15 cents, indicating a year-over-year decline of 69.4%.

Other Key Picks

Some other top-ranked stocks in the broader medical space are Wright Medical Group N.V. WMGI, Abbott Laboratories ABT and Cardiovascular Systems, Inc. CSII.

Wright Medical has a long-term expected earnings growth rate of 11%. The stock sports a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Abbott’s long-term earnings growth rate is projected at 11.7%. The stock carries a Zacks Rank #2.

Cardiovascular Systems exceeded the Zacks Consensus Estimate in each of the trailing four quarters, the average being 77.1%. The stock sports a Zacks Rank of 1.

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