Here's Why You Should Retain Tandem Diabetes (TNDM) Now
Tandem Diabetes Care, Inc. TNDM is well-poised for growth in the coming quarters, owing to the impressive new product innovations, which are currently in progress. The transition of the inventory to the new European distribution center has been a big focus for the company’s internal operations and supply chain team. A favorable solvent balance sheet further buoys investors’ optimism.
However, the company’s operations are susceptible to high inflation and the effects of other macroeconomic factors and concerns. Competitive disadvantages are also worrisome.
In the past year, this Zacks Rank #3 (Hold) stock has declined 61.5% against the 3.1% growth of the industry and a 19.8% rise of the S&P 500 composite.
The renowned medical device company has a market capitalization of $1.25 billion. Tandem Diabetes projects an estimated earnings growth rate of 22.8% for 2024 compared with the 23.8% of the industry. In the last reported quarter, TNDM delivered an earnings surprise of 44.4%.
Let’s delve deeper.
Tailwinds
Strategic Developments Bode Well: The company is off to a strong start in terms of its collaborative efforts with the Capillary Biomedical team, who joined Tandem Diabetes at the end of July 2023. It is in the planning process for the pivotal study for an extended wear infusion set and intends to use the data to support a regulatory filing with the FDA. Earlier, Tandem Diabetes collaborated with its CGM partners, Dexcom and Abbott, on the integration of their sensors.
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During the second quarter of 2023, the company completed the operational implementation of the new European distribution center, which will ease the supply chain process of its distribution partners. Management noted that the center would now support nearly 70% of the company’s sales outside the United States. Meanwhile, to further develop in the insulin pump space, in Jan 2023, Tandem Diabetes acquired Switzerland-based privately-held AMF Medical SA, the developer of the Sigi Patch Pump.
Impressive Product Innovation Continues: During the second quarter of 2023, the company began scaling the U.S. launch of Tandem Source, a second-generation web-based data management application that enhances clinical data visualization and provides added interface customization for users to personalize how they engage with their data and for healthcare providers to better manage their care.
The company’s next new technology, Tandem Mobi, is leading the way in creating a whole new category of devices for insulin therapy. Mobi is a novel miniaturized durable pump, which is approximately half the size of the company’s flagship pump platform, t:slim X2. Further, the t:slim X2 integrations with Dexcom G7 and FreeStyle Libre 2 sensors are on track for a scaled launch, beginning in the United States this fall.
Strong Solvency but Moderately Leveraged: Tandem Diabetes exited the second quarter of 2023 with cash and cash equivalents and short-term investments of $507.2 million and a total debt of $284 million. With no short-term payable debt on its balance sheet, the company boasts a strong solvent position. Total debt-to-capital ratio was 45.6%, sequentially unchanged from the first-quarter end.
Headwinds
Macroeconomic Headwinds Persist: Throughout the second quarter of 2023, the company incurred higher employee-related expenses to provide continued support services for its growing installed customer base, which was reflected in the 21.1% year-over-year increase in SG&A expenses. R&D expenses included an increase in salaries and related benefits due to acquisitions, an increase in personnel to support product development efforts, as well as an increase in other non-employee discretionary spending, equipment and clinical trials costs.
Tough Competitive Pressure: Tandem Diabetes operates in a highly competitive environment, dominated by firms ranging from large multinational corporations with significant resources to start-ups. Also, the competitive and regulatory conditions in the markets where the company operates limit the company’s ability to switch to strategies like price increases.
Estimate Trend
The Zacks Consensus Estimate for Tandem Diabetes’ 2023 loss per share has remained constant at $1.49 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $785.7 million. This suggests a 1.9% fall from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Haemonetics HAE, Align Technology ALGN and Quanterix QTRX.
Haemonetics has an estimated earnings growth rate of 26.1% for fiscal 2024 compared with the industry’s 18.7%. HAE’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 19.39%. Its shares have rallied 19.1% against the industry’s 2.5% fall in the past year.
HAE carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Align Technology, carrying a Zacks Rank #2 at present, has a long-term estimated earnings growth rate of 17.5% compared with the industry’s 12.8%. Shares of the company have increased 37.3% compared with the industry’s 53% growth over the past year.
ALGN’s earnings surpassed estimates in three of the trailing four quarters and missed once. In the last reported quarter, it delivered an average earnings surprise of 9.9%.
Quanterix, carrying a Zacks Rank #2 at present, has an estimated earnings growth rate of 62.8% for the current year compared with the industry’s 15.2%. Shares of QTRX have surged 179.6% against the industry’s 2.5% decline over the past year.
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