Three Reasons to Add Surmodics (SRDX) Stock to Your Portfolio
Surmodics, Inc. SRDX has been gaining from its solid prospects in the thrombectomy business over the past few months. The optimism led by a solid second-quarter fiscal 2023 performance and its consistent efforts to boost research and development (R&D) are expected to contribute further. Yet, concerns related to reliance on third parties and data security threats persist.
Over the past year, this Zacks Rank #2 (Buy) stock has lost 18.6% compared with the 23.3% decline of the industry. The S&P 500 has witnessed 14.6% growth in the said time frame.
The renowned medical device and in-vitro diagnostics technology provider has a market capitalization of $424.8 million. Surmodics projects 44.3% growth for fiscal 2024, expecting to maintain its strong performance. SRDX’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average earnings surprise being 21.2%.
Image Source: Zacks Investment Research
Let’s delve deeper.
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.
On its second-quarter fiscal 2023 earnings call in April, Surmodics’ management stated that the company has begun limited market evaluations for the Pounce Venous Thrombectomy system and Sublime Radial Access microcatheter.
Thrombectomy Prospects Bright: Surmodics’ aim to leverage its proprietary Pounce thrombectomy platform technology to develop products raises our optimism. In June, the company received the FDA’s approval for the SurVeil drug-coated balloon. The same month, Surmodics received the FDA’s 510(k) clearance for its Pounce LP (Low Profile) Thrombectomy System.
Strong Q2 Results: Surmodics’ better-than-expected results in second-quarter fiscal 2023 buoy optimism about the stock. The company registered a solid uptick in the overall top line. It also saw robust revenues from its Medical Device segment, as well as from its Product sales, and Research, development and other revenues. 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.
Estimate Trend
Surmodics is witnessing a positive estimate revision trend for fiscal 2023. In the past 90 days, the Zacks Consensus Estimate for its loss per share has narrowed from $1.93 to $1.85.
The Zacks Consensus Estimate for the company’s third-quarter fiscal 2023 revenues is pegged at $26.9 million, suggesting an 8.1% improvement from the year-ago reported number.
Other Key Picks
A few other top-ranked stocks in the broader medical space are Hologic, Inc. HOLX, HealthEquity, Inc. HQY and Boston Scientific Corporation BSX.
Hologic, carrying a Zacks Rank #2 at present, has an estimated growth rate of 5.1% for fiscal 2024. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average being 27.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Hologic has gained 14.9% compared with the industry’s 9.7% rise in the past year.
HealthEquity, sporting a Zacks Rank #1 at present, has an estimated long-term growth rate of 22%. HQY’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 9.1%.
HealthEquity has lost 4.1% compared with the industry’s 22.8% decline over the past year.
Boston Scientific, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11.5%. BSX’s earnings surpassed estimates in two of the trailing four quarters and missed in the other two, the average surprise being 1.9%.
Boston Scientific has gained 41.5% against the industry’s 23.3% decline over the past year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Boston Scientific Corporation (BSX) : Free Stock Analysis Report
Hologic, Inc. (HOLX) : Free Stock Analysis Report
Surmodics, Inc. (SRDX) : Free Stock Analysis Report
HealthEquity, Inc. (HQY) : Free Stock Analysis Report
