Medical devices technology company Aethlon Medical, Inc. (AEMD - Get Rating) is known for its Hemopurifier, a clinical-stage immunotherapeutic device that removes tumor-derived exosomes and life-threatening viruses from the human circulatory system. After the recent success of the Hemopurifier demonstration, clinical researchers have expressed interest in joining their ongoing clinical trial investigation to treat patients with SARS-CoV-2/COVID-19 infection.

However, the stock has lost 24% over the past three months. In addition, it is currently trading 69% below its 52-week high of $12.49, which it hit on June 9, 2021, due to the Reddit-fueled short squeeze. Moreover, AEMD’s losses widened in the second quarter. So, AEMD’s near-term prospects look bleak.

Here’s what could influence AEMD’s performance in the upcoming months:

Top Line Growth Doesn’t Translate into Bottom Line Improvement

For the fiscal first quarter ended June 30, 2021, AMED’s government contract revenue came in at $131,966. The company’s total assets increased 142.4% sequentially to $25.87 million. However, its operating loss for the quarter increased 48.8% year-over-year to $2.10 million. In comparison, its net loss came in at $2.10 million, representing a 48.7% year-over-year increase. Its loss per share came in at $0.16 compared to $0.15 in the prior-year period.

Selling Shares to Fund Growth Activities

On June 10, 2021, AEMD entered into a definitive agreement with a single institutional investor to sell roughly 1 million shares of its common stock. It is expected to use the net proceeds for working capital and other general corporate purposes. However, this could lead to share dilution.

Stretched Valuation

In terms of forward P/S, AEMD’s 52.69x is 585.3% higher than the industry average of 7.69x. Likewise, its forward EV/S of 31.34x is 351.9% higher than the industry average of 6.93x.

POWR Ratings Reflect Bleak Prospects

AEMD has an overall rating of D, which equates to Sell in our POWR Ratings system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight different categories. AEMD has a D grade for Quality. This is justified given its 0.04% trailing-12-month asset turnover ratio, 89.6% below the industry average of 0.36%.

AEMD has a D grade for Value, in sync with its higher-than-industry valuation ratios. Also, the stock has an F grade for Stability.

In addition to the POWR Rating grades I’ve just highlighted, we’ve also rated AEMD for Growth, Sentiment, and Momentum. Click here to get all the AEMD ratings.

Moreover, of the 179 stocks in the Medical – Devices & Equipment industry, AEMD is ranked #161.

Bottom Line

AEMD is one of the emerging companies focused on developing products to diagnose and treat life and organ-threatening diseases. However, the company released disappointing earnings results in the first quarter. Moreover, analysts expect its EPS to remain negative in the upcoming quarters. So, as the stock looks overvalued at the current price level, it is best avoided now.

How Does Aethlon Medical (AEMD) Stack Up Against its Peers?

While AEMD has an overall POWR Rating of D, you might want to consider investing in the following Medical – Devices & Equipment stocks with an A (Strong Buy) rating: Utah Medical Products, Inc. (UTMD - Get Rating), Natus Medical Incorporated (NTUS - Get Rating), and HOYA Corporation (HOCPY - Get Rating).

AEMD shares were trading at $3.86 per share on Wednesday afternoon, down $0.37 (-8.75%). Year-to-date, AEMD has gained 56.28%, versus a 17.34% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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