Why You Should 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 third-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 #1 (Strong Buy) stock has gained 12.3% against the 3.5% decline of the industry. The S&P 500 has witnessed 13.1% growth in the said time frame.
The renowned medical device and in-vitro diagnostics technology provider has a market capitalization of $513.9 million. Surmodics projects 76.8% growth for fiscal 2023, 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 71.2%.
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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.
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.
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 $1.85 to 22 cents.
The Zacks Consensus Estimate for the company’s fourth-quarter fiscal 2023 revenues is pegged at $26 million, suggesting a 0.02% improvement from the year-ago reported number.
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 6.9% against the industry’s 7.1% decline over the past year.
HealthEquity, carrying a Zacks Rank #2 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, with an average of 9.1%.
HealthEquity has gained 4.3% against the industry’s 14.1% 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 30.8% compared with the industry’s 1.5% rise 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
