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

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·4 min read
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  • MMSI

Merit Medical Systems, Inc. MMSI is well poised for growth in the coming quarters, backed by its strong product portfolio. A solid second-quarter 2021 performance, along with its potential in the Peripheral Intervention arm, is expected to contribute further. However, headwinds due to operation in a stiff competitive landscape and regulatory requirements persist.

Over the past year, this Zacks Rank #3 (Hold) stock has gained 53.3% compared with 25.1% growth of the industry and 27.8% rise of the S&P 500 composite.

The renowned medical devices provider has a market capitalization of $4.05 billion. The company projects 12.7% growth for the next five years and expects to maintain its strong performance. It has delivered an earnings surprise of 57.02% for the past four quarters, on average.

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Let’s delve deeper.

Potential in Peripheral Intervention Unit: Merit Medical’s Peripheral Intervention arm buoys our optimism. These products have been contributing enormously to the company’s top-line growth. During second-quarter 2021, the Peripheral Intervention product line reported strong revenue surge year over year, driven by sales of Merit Medical’s radar localization, biopsy, drainage and embolotherapy products, with growth throughout the product category.

The sale of Merit Medical’s SCOUT radar localization products was robust year over year in the quarter and was the largest contributor to the company’s total PI growth in the said time frame. The company registered strong sales of biopsy, and drainage and amyloid therapy products, as well as cardiac intervention products during the quarter.

Strong Product Portfolio: We are upbeat about Merit Medical’s continued gains on the back of significant momentum of new products. We are also optimistic about the company’s product pipeline, including radio and electrophysiology products.

The company has a number of electrophysiology products on track for release and several others in stages of development. The company has also developed a number of new products for testing of patients suspected of COVID-19. Merit Medical, in August, announced the commercial launch of the One-Vac Evacuated Drainage Bottle (One-Vac), which can be used to aspirate, remove or sample body fluids.

Other notable product offerings of the company include the Arcadia Steerable and Straight Balloons for vertebral augmentation.

Strong Q2 Results: Merit Medical’s robust second-quarter 2021 results buoy optimism. The company saw revenue growth not only across both its segments, but also across all product categories within its Cardiovascular unit. Strong execution and improving customer demand trends resulting from the gradual business recovery pushed up the overall top line, which is encouraging.

The company stands to benefit from the execution of its global growth and profitability plan. Expansion of both margins also bodes well. A raised financial outlook for the full year also raises our optimism. Potential in the company’s HeRO product line buoys optimism.

Downsides

Regulatory Requirements: Merit Medical must obtain regulatory approvals and comply with the regulations of foreign countries in which it sells its products. These regulations, including the requirement for approvals or clearances and the time required for regulatory review, vary from country to country. The EU requires that manufacturers of medical devices obtain the CE mark for compliance with the Medical Device Directive of medical devices before selling them in member countries of the EU.

Competition: Merit Medical operates in highly competitive markets. It faces competition from many companies that are larger, better-established, have greater financial, technical and other resources, and possess a greater market presence than Merit Medical. The company competes globally in several market areas, including radiology, diagnostics and interventional cardiology. Better resources and market presence may enable the competitors to market competing products more efficiently or at reduced prices, in order to gain market share.

Estimate Trend

Merit Medical is witnessing a positive estimate revision trend for 2021. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 10.9% north to $2.14.

The Zacks Consensus Estimate for the company’s third-quarter 2021 revenues is pegged at $260.9 million, suggesting a 6.9% rise from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks from the broader medical space are DexCom, Inc. DXCM, Omnicell, Inc. OMCL and West Pharmaceutical Services, Inc. WST, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DexCom’s long-term earnings growth rate is estimated at 15.3%.

Omnicell’s long-term earnings growth rate is estimated at 16%.

West Pharmaceutical’s long-term earnings growth rate is estimated at 27.3%.


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