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Here's Why You Should Retain Merit Medical (MMSI) for Now

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Merit Medical Systems, Inc. MMSI is gaining traction on portfolio expansion and solid prospects in its Peripheral Intervention unitHowever, tough competition has been offsetting the positives to some extent.

The company, with a market capitalization of $2.42 billion, is a leading developer of peripheral and cardiac intervention products. The company’s earnings are expected to improve 11.9% over the next five years. Also, this Zacks Rank #3 (Hold) company has a trailing four-quarter earnings surprise of 1.2%, on average.

In the past three months, the stock has gained 24.5% compared with 10.5% growth of its industry.

Let’s delve deeper into the factors working in favor of the company.

Product Portfolio Expansion: Merit Medical expects to launch Aspira pleural drainage, pleural effusion and peritoneal drainage products around third-quarter 2020 in Europe, Canada and Australia. Another important product – Surfacer – is a device in which the company has an equity interest.

It is important to note here that the company will shift 14 new products from Salt Lake City and one or two other facilities to either Texas or Mexico. This product portfolio expansion is expected to drive growth.

Developments on Regulatory Front: Positive feedbacks and approvals from the top-notch regulatory bodies have favored Merit Medical in recent times. Recently, the company confirmed that it has more than 50 active R&D products in its portfolio.

During February 2020, the company received approval for its steerable microcatheter, SwiftNinja. Additionally, Merit Medical received approval for its Amplatz Guide Wires. The company also received approval for its SureCross support catheter.

In April, the company was granted two additional Breakthrough Device designations by the FDA for the Merit WRAPSODY Endovascular Stent Graft System. The system is a flexible, self-expanding endoprosthesis. This regulatory clearance is expected to bolster the company’s cardiovascular segment.The CE mark of the product has also come through in May.

These approvals are significant developments with respect to driving the company’s performance.

Peripheral Intervention Unit Holds Promise: The company’s peripheral intervention unit consists of Peripheral Drainage & Biopsy, Peripheral Angiography, Peripheral Intervention and Peripheral Access Portfolio. Merit Medical also offers low-profile ASAP Aspiration Catheters, which provide clinicians with two options for the safe and efficient removal of fresh, soft emboli and thrombi from vessels. During the first quarter of 2020, the Peripheral Intervention unit saw 2.9% growth in revenues on increased demand for its access and drainage products. In the recent past, Merit Medical announced a new project of biopsy devices that are under development. This is likely to boost the company’s R&D prospects in the quarters to come.

However, there is a factor marring growth.

Cut-throat Competition: In the interventional cardiology, radiology, gastroenterology, endoscopy, general surgery, thoracic surgery and pulmonology markets, Merit Medical competes with large international, multi-divisional medical supply companies such as Cardinal Health, Boston Scientific Corporation, Medtronic and Abbott.

Estimates Trend

The Zacks Consensus Estimate for the company’s second-quarter 2020 revenues is pegged at $193.2 million, suggesting a 24.4% fall from the year-ago reported number.

For 2020, the Zacks Consensus Estimate for the company’s earnings is pegged at $1.04, indicating a 24.8% fall from the year-ago reported number.

 Key Picks

A few better-ranked stocks from the broader medical space are Laboratory Corporation of America Holdings LH, Surmodics SRDX and Quest Diagnostics DGX.

LabCorp’s long-term earnings growth rate is estimated at 6.1%. The company presently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Surmodics’ long-term earnings growth rate is estimated at 10%. The company presently carries a Zacks Rank #2 (Buy).

Quest Diagnostics’ long-term earnings growth rate is estimated at 7.6%. It currently carries a Zacks Rank #2.

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