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Finance

4 Small-Cap Medical Device Stocks Rated ‘Strong Buy’

Categorization of medical procedures as essential and non-essential to prioritize COVID-19 cases, along with supply chain constraints, have badly impacted the medical devices industry since the onset of the COVID-19 pandemic. However, with the strong vaccination drive this year, which is overwhelmingly responsible for gains in slowing the pandemic’s spread, the demand for advanced medical devices has been recovering with the rescheduling of several delayed surgeries.

The global medical devices market is expected to grow at a 5.2% CAGR to  $671.49 billion by 2027.

While the resurgence of COVID-19 cases might slow the industry’s pace of recovery in the near term, expected long-term growth based on the innovative product pipelines of small-cap companies Varex Imaging Corporation (VREX), Natus Medical Incorporated (NTUS), Orthofix Medical Inc. (OFIX), and IRadimed Corporation (IRMD) should help their shares move higher in price. Each of these stocks is rated A (Strong Buy) in our proprietary POWR Ratings system.

Click here to checkout our Healthcare Sector Report for 2021

Varex Imaging Corporation (VREX)

With a market capitalization of $1.10 billion, VREX manufactures and sells X-ray tubes, digital detectors, linear accelerators, and other image software processing solutions. Operating under the Medical and Industrial segments, VREX’s components are used for medical imaging, cargo screening, and border security to detect, diagnose and protect. Its products are sold through imaging system OEMs, independent service companies, distributors, and directly to end-users. VREX is headquartered in Salt Lake City, Utah.

In July,  VREX added the LUMEN 4336W digital radiography detector to its product line. With an industry leading IP68 rating, this detector offers increased reliability, durability, and convenience for customers and end-users. The company expects to witness widespread market demand  for this detector in the coming months.

VREX’s revenues for its fiscal third quarter, ended July 2, 2021, increased 23.4% year-over-year to $211.20 million. The company’s non-GAAP gross profit came in at $76.30 million for the quarter, up 68.8% in the prior-year period. Its non-GAAP operating income came in at $30.30 million, compared to a $1.20 million loss in the year-ago period. Its non-GAAP net income has been reported at $16.10 million, compared to an $8 million loss in the prior-year period. Its non-GAAP EPS came in at $0.40, compared to a $0.21 loss per share in the year-ago period. The company had $128.30 million in cash and cash equivalents as of July 2, 2021.

A $1.21 consensus EPS estimate for the current fiscal year represents a 1408.3% improvement year-over-year. VREX surpassed consensus EPS estimates in each of the trailing four quarters. The $807.30 million consensus revenue estimate for the current year represents a 9.4% gain from the prior-year period. Analysts expect the stock’s EPS to grow at a 5% rate per annum over the next five years.

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The stock has gained 132.9% over the past year and 4.5% over the past six months. It closed yesterday’s trading session at $27.89.

VREX’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

The stock has an A grade for Growth, and a B grade for Value and Stability. Click here to see the additional ratings for VREX (Quality, Sentiment, and Momentum).

VREX is ranked #16 of 184 stocks in the Medical – Devices & Equipment industry.

Natus Medical Incorporated (NTUS)

NTUS is a medical device company that develops, manufactures, and markets screening products focused on diagnosing and treating central nervous and sensory system disorders for patients of all ages. The Pleasanton, Calif.-based company operates through three strategic business units: Neurology; Newborn Care; and Hearing & Balance. It serves university medical centers, hospitals, clinics, research laboratories, and others. NTUS has an $886.37 million market capitalization.

On August 3, 2021, NTUS announced the completion of the first successfully performed clinical case using NTUS’ newly launched XactTrode family of platinum subdural electrodes for epilepsy surgical monitoring. NTUS is ready to launch XactTrodes in the U.S. market with this success and expects to see massive demand for the electrodes in the coming months.

For its  fiscal second quarter, ended June 30, 2021, NTUS’ revenue increased 36.8% year-over-year to $115.98 million. The company’s non-GAAP gross profit has been reported at $69.76 million, representing a 59.7% year-over-year improvement. Its non-GAAP operating income came in at $13.57 million, versus a $4.66 million loss in the prior-year period. NTUS’ non-GAAP net income has been reported at $9.85 million, compared to a $4.41 million loss in the prior-year period. Its non-GAAP EPS came in at $0.29, versus a $0.13 loss per share in the year-ago period. As of June 30, 2021, the company had $62.49 million in cash and cash equivalents.

NTUS’ EPS is estimated to rise 233.3% year-over-year to $0.30 in the current quarter ending September 30, 2021. It surpassed Street EPS estimates in each of the trailing four quarters. Analysts expect its revenue to be $116.60 million for the current quarter, representing a 13.4% rise year-over-year. Its EPS is expected to grow at a 22% rate per annum over the next five years.

The stock has gained 54.4% in price over the past year and 4.6% over the past month. It ended yesterday’s trading session at $25.97.

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NTUS’ POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.

The stock has an A grade for Growth and Value, and a B grade for Quality. Click here to see the additional ratings for NTUS (Stability, Momentum, and Sentiment).

NTUS is ranked #9 in the  Medical – Devices & Equipment  industry.

Orthofix Medical Inc. (OFIX)

OFIX, which is headquartered in Willemstad, Curaçao, operates as a global medical device and biologics company that focuses on providing reconstructive and regenerative orthopedic and spine solutions worldwide. It serves physicians, hospitals, ambulatory surgery centers, integrated health delivery systems, and other purchasing organizations via sales representatives and independent distributors. It has a market capitalization of $811.43 million.

On July 28, 2021, OFIX announced the U.S. launch and first patient implants of the fiberFUSE Strip, an advanced demineralized fiber bone-graft solution that contains cancellous bone, for applications in posterior cervical, posterior lumbar, and degenerative spinal procedures. The fiberFUSE Strip delivers a high-quality advanced bone-graft option in a convenient, easy-to-use strip preparation. This technology advancement is developed as part of OFIX’s strategy to provide procedurally focused solutions for spine surgeons and their patients.

OFIX’s net sales for its fiscal second quarter, ended June 30, 2021, increased 66% year-over-year to $121.39 million. The company’s gross profit came in at $384.60 million, representing an 88% year-over-year improvement. Its operating income has been reported at $4.27 million for the quarter, compared to a  $21 million loss  in the prior-year period. OFIX’s adjusted net income was  $6.30 million, compared to a $11.25 million loss in the year-ago period. Its adjusted EPS was  $0.32, versus a $0.59 loss per share in the prior-year period. As of June 30, 2021, the company had $79.97 million in cash and cash equivalents.

For the current fiscal year, analysts expect OFIX’s EPS to be $0.79, up 203.9% from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. A $471.33 million consensus revenue estimate  for the current year represents a 15.9% rise from the prior-year period. Analysts expect OSK’s EPS to grow at a 9.4% rate per annum over the next five years.

OFIX gained 34.3% over the past year and 7.8% over the past month. It ended yesterday’s trading session at $41.20.

OFIX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.

The stock has an A grade for Value, and a B grade for Quality. We also have graded OFIX for Growth, Stability, Sentiment, and Momentum. Click here to access all OFIX’s ratings.

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OFIX is ranked #15 in the  Medical – Devices & Equipment industry.

IRadimed Corporation (IRMD)

With a $413.02 million market capitalization of, IRMD in Winter Springs, Fla., manufactures and distributes magnetic resonance imaging (MRI) compatible medical devices and related accessories and services internationally. The company also provides a non-magnetic Intravenous (IV) infusion pump system specifically designed for MRI procedures. It sells its products through direct field sales representatives, regional sales directors, clinical support representatives, and independent distributors.

For its fiscal second quarter ended June 30, 2021, IRMD’s revenue increased 44.4% year-over-year to $9.81 million. The company’s gross profit came in at $7.33 million, up 48.7% from the prior-year period. Its income from operations was  $1.84 million for the quarter, compared to a $2.93 million loss in the prior-year period. While its non-GAAP net income increased 208.7% year-over-year to $1.74 million, its non-GAAP EPS increased 180% to $0.14. The company had $55.16 million in cash and cash equivalents as of June 30, 2021.

Analysts expect IRMD’s EPS to improve 54.6% year-over-year in the current quarter, ending September 30, 2021, to $0.15. It surpassed the Street’s EPS estimates in three of the trailing four quarters. The $10.39 million consensus revenue estimate for the current quarter represents a 35% rise from the prior-year period. Analysts expect the stock’s EPS to grow at a 17.5% rate per annum over the next five years.

IRMD has gained 55.7% over the past year and 19.2% over the past three months. It closed yesterday’s trading session at $33.53.

It’s no surprise that IRMD has an overall A rating, which equates to Strong Buy in our POWR Ratings system.

The stock has an A grade for Sentiment and Quality, and a B grade for Growth and Stability. Click here to see the additional ratings for IRMD’s Value and Momentum.

IMRD is ranked #6 in the  Medical – Devices & Equipment industry.

Click here to checkout our Healthcare Sector Report for 2021


VREX shares were trading at $27.95 per share on Wednesday afternoon, up $0.06 (+0.22%). Year-to-date, VREX has gained 67.57%, versus a 20.91% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More…

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