The medical industry is set for strong growth due to an aging population, rising infectious diseases, and increasing chronic conditions. With this, the industry's focus on personalized medicine and technological advancements boosts demand for high-quality MedTech products globally, positioning the industry for robust expansion.
Amid this backdrop, it could be wise to add fundamentally strong MedTech stocks such as Tactile Systems Technology, Inc. (TCMD), Electromed, Inc. (ELMD), and Embecta Corp. (EMBC) to one’s portfolio in July.
The MedTech industry's prospects are promising thanks to quality patient care with telemedicine, digital therapeutics, bioprinting, biometric wearables, and the ever-evolving Internet of Medical Things (IoMT). These advancements have led to better patient outcomes and overall industry growth. Hence, the global medical devices market is expected to reach $886.80 billion by 2032, growing at a CAGR of 6.3%.
Notably, AI in MedTech has revolutionized the efficient handling of large healthcare data and enabled accurate diagnosis through AI-based image analysis. This enhances cancer detection, tissue assessment, anatomical measurement, and surgical planning, ensuring better patient outcomes. The global AI in medical devices market is expected to reach $97.07 billion by 2028, growing at a 44.4% CAGR.
Considering these conducive trends, let’s analyze the fundamentals of the three Medical - Devices & Equipment picks mentioned above, beginning with the third choice.
Stock #3: Tactile Systems Technology, Inc. (TCMD)
TCMD is a medical technology company that develops and provides medical devices to treat underserved chronic diseases. It offers the Flexitouch Plus system and the Entre Plus System. The company also provides Kylee, a mobile application to help patients learn about lymphedema, and AffloVest.
In terms of the trailing-12-month EBITDA margin, TCMD’s 8.06% is 39.5% higher than the 5.78% industry average. Likewise, its 1.01x trailing-12-month asset turnover ratio is 151.3% higher than the 0.40x industry average. Its 5.69% trailing-12-month EBIT margin is 201% higher than the 1.89% industry average.
During the first quarter that ended March 31, 2024, TCMD’s total revenue increased 3.8% year-over-year to $61.09 million. Its non-GAAP gross profit rose 4.7% over the prior-year quarter to $43.75 million. Similarly, its adjusted EBITDA was $1.03 million, up 104.2% over the prior-year quarter.
Moreover, for the three months that ended March 31, 2024, TCMD’s cash and cash equivalents – end of period stood at $60.71 million, up 21.3% from the prior-year period.
Street expects TCMD’s EPS and revenue for the quarter ended June 30, 2024, to increase 202% and 6.5% year-over-year to $0.14 and $72.81 million, respectively. It surpassed Street revenue estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 13.9% to close the last trading session at $12.75.
TCMD’s POWR Ratings reflect strong prospects. It has an overall rating of B, translating to a Buy in our proprietary system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #7 out of 133 stocks in the Medical - Devices & Equipment industry. It has an A grade for Value and a B for Growth and Quality. Click here to see TCMD’s ratings for Momentum, Stability, and Sentiment.
Stock #2: Electromed, Inc. (ELMD)
ELMD develops, manufactures, markets, and sells airway clearance therapy and related products that apply high-frequency chest wall oscillation (HFCWO) therapy in pulmonary care for patients of various ages internationally. The company offers the SmartVest airway clearance system, SmartVest SQL System, and SmartVest Connect.
In terms of the trailing-12-month EBIT margin, ELMD’s 10.73% is 467.4% higher than the 1.89% industry average. Likewise, its 1.17x trailing-12-month asset turnover ratio is 190% higher than the 0.40x industry average. Moreover, its 7.0% trailing-12-month levered FCF margin is 448.9% higher than the 1.28% industry average.
ELMD’s net revenues for the third quarter that ended March 31, 2024, increased 14.9% year-over-year to $13.87 million. Its operating income came in at $1.84 million, up 53.9% year-over-year. Moreover, the company’s net income and net income per share rose 38.9% and 41.7% year-over-year to $1.49 million and $0.17, respectively.
For the quarter ended June 30, 2024, ELMD’s EPS and revenue are expected to increase 16.7% and 10.2% year-over-year to $0.14 and $15 million, respectively. Over the past nine months, ELMD’s stock has gained 45.4% to close the last trading session at $15.34.
ELMD’s positive outlook is reflected in its POWR Ratings. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Sentiment and a B for Value and Quality. It is ranked #2 in the same industry. Click here to see ELMD’s Growth, Momentum, and Stability ratings.
Stock #1: Embecta Corp. (EMBC)
EMBC is a medical device company that focuses on providing various solutions to enhance the health and well-being of people living with diabetes. Its products include pen needles, syringes, and safety injection devices, as well as digital applications to assist people in managing diabetes.
In terms of the trailing-12-month levered FCF margin, EMBC’s 3.91% is 204.9% higher than the 1.28% industry average. Likewise, its 65.57% trailing-12-month gross profit margin is 14.5% higher than the 57.25% industry average. Moreover, its 19.69% trailing-12-month EBITDA margin is 240.9% higher than the 5.78% industry average.
For the fiscal second quarter that ended March 31, 2023, EMBC’s revenues grew 3.6% year-over-year to $287.20 million, while its adjusted gross profit for the quarter stood at $185.80 million. For the same quarter, the company’s adjusted net income and adjusted net income per share came in at $38.90 million and $0.67, respectively.
EMBC’s total current liabilities as of March 31, 2024, amounted to $310.40 million, compared to $353.50 million as of September 30, 2023.
Analysts expect EMBC’s revenue for the quarter ending December 31, 2024, to increase marginally year-over-year to $277.39 million. EMBC surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past three months, the stock has gained 27.5% to close the last trading session at $13.20.
EMBC’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Value and Quality and a B for Growth. Within the Medical - Devices & Equipment industry, it is ranked #first. To see EMBC’s Momentum, Stability, and Sentiment rating, click here.
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EMBC shares were trading at $13.56 per share on Wednesday afternoon, up $0.36 (+2.73%). Year-to-date, EMBC has declined -26.78%, versus a 18.12% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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