Unveiling Axonics (AXNX)'s Value: Is It Really Priced Right? A Comprehensive Guide
On September 22, 2023, Axonics Inc (NASDAQ:AXNX) reported a 1.95% daily loss, bringing its 3-month gain to 8.53%. Despite a Loss Per Share of $0.67, the question arises: is the stock significantly undervalued? This article aims to answer this question, delving into Axonics' valuation and encouraging readers to explore the analysis that follows.
Company Introduction
Axonics Inc is a US-based medical technology company specializing in the design, development, and commercialization of innovative and minimally invasive sacral neuromodulation (SNM) solutions. SNM therapy is primarily used to treat patients with overactive bladder, fecal incontinence, and urinary retention. The company's r-SNM System delivers mild electrical pulses to the targeted sacral nerve to restore normal communication to and from the brain, reducing the symptoms of overactive bladder and fecal incontinence.
Currently trading at $54.34 per share, Axonics (NASDAQ:AXNX) has a market cap of $2.70 billion. However, its GF Value, an estimation of fair value, is $102.87, suggesting that the stock is significantly undervalued.
Understanding GF Value
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. It considers historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. The GF Value Line provides an overview of the stock's fair trading value. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Axonics (NASDAQ:AXNX) is estimated to be significantly undervalued based on the GF Value calculation. Given this undervaluation, the long-term return of its stock is likely to be much higher than its business growth.
Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it is crucial to review a company's financial strength before deciding to buy shares. Axonics has a cash-to-debt ratio of 111.7, ranking better than 85.73% of 841 companies in the Medical Devices & Instruments industry. This strong balance sheet earns Axonics a financial strength rank of 8 out of 10.
Profitability and Growth
Consistent profitability reduces risk for investors. Higher profit margins usually suggest a better investment compared to a company with lower profit margins. Axonics has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $319.90 million and Loss Per Share of $0.67. Its operating margin is -5.71%, which ranks worse than 55.38% of 836 companies in the Medical Devices & Instruments industry. Overall, the profitability of Axonics is ranked 3 out of 10, indicating poor profitability.
Growth is one of the most important factors in the valuation of a company. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Axonics is 129.7%, ranking better than 96.85% of 731 companies in the Medical Devices & Instruments industry. The 3-year average EBITDA growth is 27.2%, ranking better than 73.31% of 738 companies in the same industry.
Evaluating Profitability: ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) is another way to evaluate its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Axonics's ROIC was -6.01, while its WACC came in at 7.82.
Conclusion
Overall, Axonics (NASDAQ:AXNX) stock is estimated to be significantly undervalued. The company's financial condition is strong, but its profitability is poor. Its growth ranks better than 73.31% of 738 companies in the Medical Devices & Instruments industry. To learn more about Axonics stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
