Surmodics (SRDX) Hits 52-Week High: What's Driving the Stock?
Shares of Surmodics, Inc. SRDX scaled a new 52-week high of $39.41 on Sep 11, before closing the session slightly lower at $38.25.
Over the past year, this Zacks Rank #1 (Strong Buy) stock has gained 21.4% against the 3.9% decline of the industry. The S&P 500 has witnessed 14.5% growth in the said time frame.
The company’s expected growth rate of 76.8% for fiscal 2023 compares with the industry’s growth projection of 15.6%. Surmodics’ earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 71.2%.
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Surmodics is witnessing an upward trend in its stock price, prompted by its consistent efforts to boost research and development (R&D). The optimism led by a solid third-quarter fiscal 2023 performance and prospects in the thrombectomy business are expected to contribute further. Yet, concerns related to reliance on third parties and data security threats persist.
Let’s delve deeper.
Key Growth Drivers
Consistent Efforts to Boost R&D: Surmodics’ solid efforts to improve its R&D stature have been a key growth driver, which raises our optimism. The company’s whole product solutions pipeline and sirolimus-based below-the-knee drug-coated balloon program deserve mention. Surmodics has been making progress using its internally developed .014 balloon platform.
For the first nine months of fiscal 2023, R&D expenses reflected continued investment in medical device product development, including in Surmodics’ Pounce thrombectomy and Sublime radial access product platforms and costs associated with its SurVeil drug-coated balloon (DCB).
Thrombectomy Prospects Bright: Surmodics’ aim to leverage its proprietary Pounce thrombectomy platform technology to develop products raises our optimism. On the third quarter of fiscal 2023 earnings call in August, Surmodics’ management stated that sales of its Pounce Arterial Thrombectomy and Sublime Radial products were an important contributor to the 38% medical device business product sales growth achieved in the quarter.
In June, Surmodics received the FDA’s approval for the SurVeil DCB.
Strong Q3 Results: Surmodics registered a solid uptick in the overall top and bottom lines in the third quarter of fiscal 2023. The company recorded robust revenues from its Medical Device segment and primary sources. During the quarter, Surmodics witnessed strong contributions from sales of its Pounce and Sublime products, indicating their continued solid demand.
Downsides
Reliance on Third Parties: A principal element of Surmodics’ business strategy is to enter into licensing arrangements with medical devices and other companies that manufacture products incorporating its technologies. The revenues it derives from such arrangements depend upon its ability or its licensees’ ability to successfully develop, obtain regulatory approval for, market and sell products incorporating Surmodics’ technologies. Its failure or the failure of its licensees to meet these requirements could have a material adverse effect on Surmodics’ business.
Data Security Threats: Surmodics collects and stores sensitive data, including its proprietary business information, on its networks. The secure maintenance of this information is critical to its operations and business strategy. Despite Surmodics’ security measures, its information technology and infrastructure may be vulnerable to attacks by hackers, resulting from employee error or other disruptions.
Other Key Picks
A few other top-ranked stocks in the broader medical space are DaVita Inc. DVA, HealthEquity, Inc. HQY and Integer Holdings Corporation ITGR.
DaVita, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 12.7%. DVA’s earnings surpassed estimates in three of the trailing four quarters and missed once, with an average surprise of 21.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita has gained 4.4% against the industry’s 8.9% decline over the past year.
HealthEquity, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 22.2%. HQY’s earnings surpassed estimates in all the trailing four quarters, with an average of 13%.
HealthEquity has gained 0.1% against the industry’s 12.2% decline over the past year.
Integer Holdings, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 12.1%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 8.4%.
Integer Holdings has gained 27.2% against the industry’s 2.3% decline over the past year.
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DaVita Inc. (DVA) : Free Stock Analysis Report
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Integer Holdings Corporation (ITGR) : Free Stock Analysis Report
