Arrhythmia management company Acutus Medical, Inc. (AFIB - Get Rating) in Carlsbad, Calif., designs, manufactures and markets a range of tools for catheter-based ablation procedures to treat various arrhythmias in the United States and internationally. AFIB shares have slumped 91.4% in price over the past year and 67.7% year-to-date to close yesterday’s trading session at $1.10.

The stock gained traction last week after the company announced that it had secured a commitment letter from Deerfield Management Company to refinance its existing debt with a new longer-term credit facility. AFIB also announced a definitive agreement to sell its left-heart access portfolio to Medtronic Plc (MDT). 

The company expects these two transactions and its recently completed restructuring to result in a comprehensive recapitalization of the business to fund its strategic growth priorities. AFIB stock has been up 1.4% in price over the past five days.

Here is what could shape AFIB’s performance in the near term:

Poor Profitability

AFIB’s negative 90.73% gross profit margin is substantially lower than the 55.18% industry average.

Furthermore, AFIB’s negative 101.32%, 69.31%, and 45.43% respective ROE, ROA, and ROT compare with the negative 37.46%, 24.85%, and 19.97% industry averages.

Weak Bottom Line

The company’s revenue increased 69.5% year-over-year to $4.36 million in its fiscal fourth quarter, ended Dec. 31, 2021. Its loss from operations stood at $29.90 million, up 6.8% from its year-ago value. AFIB’s net loss increased 6.3% year-over-year to $31.26 million, while its comprehensive loss grew 7.7% year-over-year to $31.44 million. Its net loss per share increased 6.7% from the prior-year quarter to $1.12. And on a non-GAAP basis, its net loss for the fourth quarter of 2021 was $27.99 million, or $1.00 per share, compared to $24.86 million, or $0.89 per share, for the fourth quarter of 2020. Also, its cash and cash equivalents balance came in at $24.22 million in its fiscal year ended Dec. 31, 2021, indicating a 4.6% decline year-over-year.

Bearish Sentiments

Analysts have reduced their revenue estimate for this year to $17 million versus the previous estimate of $23 million. Also, analysts now expect AFIB’s loss per share for the fiscal year to be  $3.01, compared to the earlier expectation of $2.83. Also, its sales are expected to reverse, with a forecast 1.3% annualized revenue decline through the end of 2022, compared to its historical growth of 67% over the last three years. In addition, AFIB is expected to perform substantially worse than the wider industry.

The Street expects AFIB’s revenue to decline 12.9% year-over-year to $3.13 million in the about to be reported quarter, ended March 31, 2022. Also, its revenue is expected to decrease 18.2% in the current  quarter, ending June 30, 2022, 5.5% in the next quarter, ending Sept. 30,  2022, and 3.9% in the current fiscal year. Also, the company’s EPS is expected to remain negative at least until this year.

POWR Ratings Reflect This Bleak Prospects

AFIB has an overall D rating, which translates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has an F grade for Quality, which is consistent with its negative profit margins.

AFIB has a D grade for Sentiment. Bearish analysts’ sentiments about the stock justify this grade.

Of the 157 stocks in the D-rated  Medical – Devices & Equipment industry, AFIB is ranked #131.

Beyond what I have stated above, one can also view AFIB’s grades for Stability, Growth, Momentum, and Value here.

View the top-rated stocks in the Medical – Devices & Equipment industry here.

Click here to checkout our Healthcare Sector Report for 2022

Bottom Line

Although the company posted significant revenue growth in its last reported quarter, analysts are bearish about its near-term topline performance. Also, analysts increased their loss per share estimates for this year. So, given its bleak financial positioning, I think it could be wise to avoid the stock for now.

How Does Acutus Medical, Inc. (AFIB) Stack Up Against its Peers?

While AFIB has an overall POWR Rating of D, one might want to consider investing in the following Medical – Devices & Equipment stocks with an A (Strong Buy) rating: Fonar Corporation (FONR - Get Rating), Abbott Laboratories (ABT - Get Rating), and Electromed, Inc. (ELMD - Get Rating).

AFIB shares fell $0.01 (-0.91%) in premarket trading Wednesday. Year-to-date, AFIB has declined -67.74%, versus a -12.06% rise in the benchmark S&P 500 index during the same period.

About the Author: Subhasree Kar

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...

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