The medical devices market is experiencing significant growth, driven by the rapidly aging population worldwide and technological innovations. According to projections by the WHO, the number of people aged 60 years or older is expected to double by 2050, reaching 2.1 billion.

Additionally, technological advancements in artificial intelligence, advanced algorithms, and predictive analytics are also transforming the sector, facilitating early detection and improved treatment outcomes for critically ill patients and those with chronic diseases. That being said, the medical devices market is expected to reach $955.49 billion by 2030, growing at a CAGR of 7%.

Amid this growth, Embecta Corp. (EMBC - Get Rating) stands out as a leading figure in the medical devices industry, offering advanced solutions for patients suffering from diabetes and related conditions. EMBC’s shares have surged 37.9% over the past six months and 82.4% over the past nine months, closing the last trading session at $18.68.

Now, let us dive deeper into the factors that could shape EMBC’s performance in the near future.

Recent Developments

On September 3, 2024, EMBC announced 510(k) clearance from the U.S. Food and Drug Administration (FDA) for its proprietary disposable insulin delivery system for adults who require insulin to manage diabetes, including both type 1 and type 2.

The FDA clearance allows the company to begin its sale and enhances the prospects of sales growth and the company’s overall market presence in the treatment of diabetes.

Sound Financials

For the fiscal 2024 fourth quarter that ended September 30, EMBC’s revenues increased 1.5% year-over-year to $286.10 million. Its adjusted operating income came in at $61.20 million.

Additionally, the company’s adjusted net income and adjusted net income per share were reported to be $25.90 million and $0.45, respectively. As of September 30, 2024, EMBC’s total assets amounted to $1.29 billion, compared to $1.21 billion on September 30, 2023.

Optimistic Analyst Estimates

Analysts expect EMBC’s revenue for the fiscal 2025 second quarter (ending in March 2025) to come in at $276.82 million. Its EPS for the same period is expected to rise marginally year-over-year to $0.67. In addition, the company exceeded the consensus revenue and EPS estimates in each of the four trailing quarters, which is impressive.

Looking at the full fiscal year ending September 2025, EMBC’s revenue is expected t to come in at $1.11 billion, whereas its EPS for the same period is expected to rise 8.7% year-over-year to $2.66.

High Profitability

EMBC’s trailing-12-month gross profit margin of 65.46% is 12.4% higher than the industry average of 58.26%. Its trailing-12-month EBITDA margin stands at 7.55%, 31.1% higher than the industry average of 5.76%.

In addition, the company boasts a trailing-12-month asset turnover ratio of 0.90x, which is 116.8% higher than the sector average of 0.41x. Also, the stock’s trailing-12-month cash from operations of $35.70 million compares to the industry average of negative $14.97 million.

Discounted Valuation

EMBC is currently trading at a forward EV/Sales of 2.21x, which is 35.9% lower than the industry average of 3.45x. Moreover, the stock’s forward EV/EBIT multiple stands at 7.48, 54.3% lower than the industry average of 16.35x.

Additionally, it has a forward Price/Sales multiple of 0.98, which is 72.7% lower than the industry average of 3.59. This indicates that EMBC is undervalued compared to the broader market, offering potential upside for investors.

POWR Ratings Reflects Optimism

EMBC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

EMBC has an A grade for Value, driven by its discounted valuation metrics relative to the industry average. Moreover, it earned an A grade for Quality, supported by profitability measures that exceeded industry benchmarks. Plus, the stock holds a B grade for Sentiment, which is in line with the optimistic analyst estimates.

EMBC has topped the 133-stock Medical – Devices & Equipment industry. Beyond what is stated above, we have also given EMBC grades for Momentum, Stability, and Growth. Get all EMBC ratings here.

Bottom Line

EMBC has strengthened its position as a leading figure in the medical devices industry, driven by its advanced treatment for diabetes and related conditions. With an increasingly aging population, the need for these treatments is only set to increase, bringing in solid growth prospects for the company.

Given EMBC’s impressive analyst estimates, high profitability, and attractive valuation, now could be the ideal time to consider adding the stock to your portfolio.

How Does Embecta Corp. (EMBC) Stack Up Against Its Peers?

Although EMBC’s near-term outlook appears sound, it may be worthwhile to explore its industry peers, who also exhibit strong POWR Ratings. So, consider these A (Strong Buy) rated stocks from the Medical – Devices & Equipment industry:

LivaNova PLC (LIVN - Get Rating)

Brainsway Ltd. (BWAY - Get Rating)

InfuSystems Holdings, Inc. (INFU - Get Rating)

To explore more A or B-rated Medical – Devices & Equipment stocks, click here.

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EMBC shares were unchanged in premarket trading Monday. Year-to-date, EMBC has declined -9.54%, versus a 1.96% rise in the benchmark S&P 500 index during the same period.

About the Author: Aritra_Gangopadhyay

Aritra is a financial journalist dedicated to breaking down complex financial topics into simple, actionable insights. Holding a Master’s degree in Economics, he uses his analytical expertise to help investors uncover unique opportunities for long-term success. More...

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