The rate of non-communicable diseases (NCDs) or chronic diseases have multiplied over the past years. According to the World Health Organization (WHO), every year, 17 million people die from NCD before age 70. The most prevalent NCDs are cardiovascular diseases, cancers, chronic respiratory diseases, and diabetes.
Amid rising health problems, demand for medical diagnoses and treatments has soared. According to Acumen Research and Consulting, the global portable medical devices market is projected to grow at a CAGR of 8.5% from 2022 to 2030. The growing demand for healthcare services should bode well for ABT and RMED.
Abbott Laboratories (ABT) and its subsidiaries discover, develop, manufacture, and sell health care products worldwide. It operates in four segments: Established Pharmaceutical Products; Diagnostic Products; Nutritional Products; and Medical Devices.
On the other hand, medical device company Ra Medical Systems, Inc. (RMED) develops, manufactures, and markets excimer lasers to treat vascular immune-mediated inflammatory diseases. The company sells its products primarily through distributors in the United States.
RMED has lost 13.9% over the past month, while ABT has lost 5%. RMED has lost 95.9% over the past year and 91.7% year-to-date, while ABT has lost 19.7% over the past year and 28.5% year-to-date. But which of these stocks is the better pick now? Let’s find out.
On September 12, 2022, RMED entered into an Agreement and Plan of Merger with Catheter Precision, Inc., a medical device and technology company focused on the field of cardiac electrophysiology. On completion, the Merger will make for a combined publicly-traded company focused on the cardiac electrophysiology market.
However, on September 13, 2022, Weiss Law started investigating possible breaches of fiduciary duty and other law violations by RMED in connection with the proposed Merger.
On the other hand, on August 23, 2022, the U.S. Food and Drug Administration approved ABT’s new Proclaim™ Plus spinal cord stimulation (SCS) system featuring FlexBurst360™ therapy, which marks a significant milestone for the company.
Also, on August 4, 2022, ABT and WW International, Inc. (WW), a weight management devices company, announced their strategic partnership to assist people with diabetes. This collaboration should benefit ABT amid the rising number of people with diabetes.
Recent Financial Results
RMED’s product sales came in at $5,000 for the second quarter ended June 30, 2022, down 44.4% year-over-year. Its operating loss came in at $8.46 million, up 25.6% year-over-year. Also, its net loss came in at $8.45 million, up 60.9% year-over-year.
ABT’s net sales came in at $11.26 billion for the second quarter ended June 30, 2022, up 10.1% year-over-year. Its adjusted net earnings came in at $2.54 billion, up 20.2% year-over-year, while its adjusted EPS came in at $1.43, up 22.2% year-over-year.
Past and Expected Financial Performance
RMED’s revenue has declined at an 85.8% CAGR over the past three years. Its revenue is expected to fall 54.5% year-over-year to $10,000 in 2022. Its EPS is estimated to grow 85.5% year-over-year to negative $0.72 in 2022. However, its EPS is expected to remain negative in 2023. Moreover, it missed EPS estimates in each of the trailing four quarters.
On the other hand, ABT’s revenue and EPS have increased at 13.8% and 43.4% CAGRs over the past three years. Its revenue is expected to decrease marginally year-over-year to $42.50 billion in 2022. However, its EPS is expected to increase 11% per annum for the next five years. Moreover, the stock surpassed EPS estimates in all the trailing four quarters.
RMED’s negative ROE, ROA, and ROTC of 190.69%, 1.11%, and 91.56% are lower than ABT’s 24.18%, 0.12%, and 12.46%, respectively.
Thus, ABT is more profitable.
In terms of trailing-12-month Price/Sales, RMED’s 91.81x is 2,254.1% higher than ABT’s 3.90x. However, RMED’s trailing-12-month Price/Book of 0.43x is lower than ABT’s 4.83x.
ABT has an overall rating of A, equating to Strong Buy in our proprietary POWR Ratings system. On the other hand, RMED has an overall rating of D, which translates to Sell. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
ABT has a B grade for Quality. Its trailing-12-month ROCE of 24.24% is higher than the industry average of negative 38.46%.
On the other hand, RMED has an F grade for Quality. Its trailing-12-month ROCE of negative 190.69% is lower than the industry average.
In addition, ABT has a B grade for Stability, in sync with its 24-month beta of 0.69, while RMED has an F grade for Stability, consistent with its 24-month beta of 1.31.
Of the 219-stock Medical – Devices & Equipment industry, ABT is ranked #5, and RMED is ranked #171.
Both ABT and RMED should benefit from the healthcare industry tailwinds. However, ABT’s higher profitability and robust financials make it a better Buy this fall.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Medical – Devices & Equipment industry here.
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ABT shares were trading at $100.38 per share on Monday morning, down $0.30 (-0.30%). Year-to-date, ABT has declined -27.82%, versus a -21.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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