Medical technology company Motus GI Holdings, Inc. (MOTS) provides endoscopy solutions and is known for its flagship product Pure-Vu. The system helps in early detection and prevention of colorectal cancer and other diseases of the rectum and colon. However, the company is still in its early stages of development.
MOTS’ stock has lost 3.5% over the past three months to close Friday’s trading session at $1.39. It is currently trading 49.3% below its $2.74 52-week high and much below its $10.50 all-time high, which it hit on July 1, 2018.
The company had an unimpressive market debut in 2018, and it has failed to generate a profit so far. So, even as the healthcare industry overall is expected to see decent growth this year and beyond, we think it’s wise to avoid MOTS now.
Here’s what we think could shape MOTS’ performance in the near term:
Narrow Portfolio of Products
The COVID-19 pandemic highlighted the need for improvements in the healthcare sector. As a result, several healthcare companies have been ramping up their production and developmental activities and are also integrating advanced technology in their product and services offerings. In fact, according to an Acumen Research and Consulting report, the global medical device cleaning market is expected to grow at a 7.8% CAGR over the next six years.
However, MOTS is not well-positioned to gain from industry tailwinds because it might be a one-trick pony. On April 30 It received 510(k) clearance from the U.S. Food and Drug Administration (FDA) to market its Pure-Vu system for upper GI endoscopy but its near-term prospects remain uncertain because it unknown if the device will be widely accepted across several hospitals given that there is intense competition in this space and several established companies produce similar products.
Leveraging Shares to Fund Company’s Growth Activities
In January, MOTS signed a warrant exercise agreement with an existing institutional investor and expects to generate roughly $11 million in gross proceeds. The company is expected to use the proceeds to fund the commercialization of its Pure-Vu System, for working capital and for other general corporate purposes.
For the fourth quarter ended December 31, 2020 MOTS’ top line declined 63.6% year-over-year to $36,000. The company said, “our sales team is still encountering limited access at most hospitals as a result of the pandemic.” Its operating loss for the quarter was $4,293 while its net loss came in at $4,399. Also, the company’s loss per share came in at $0.12 in the fourth quarter.
POWR Ratings Reflect Bleak Outlook
MOTS has an overall F rating, which equates to Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. MOTS has a D grade for Value. This is justified given that its 114.61x forward EV/Sales is significantly higher than the 6.85x industry average. Its 140.71x forward P/S is also higher than the 7.24x industry average.
The stock has a F grade for Quality, in sync with its negative gross profit margin, ROE and ROA. It has a F grade for Stability as well.
Beyond what we’ve stated above, we’ve also given MOTS grades for Momentum, Sentiment, and growth. Get all the MOTS ratings here.
MOTS is ranked #168 of 181 stocks in the C-rated Medical – Devices & Equipment industry.
Better than MOTS: Click here to access several top-rated stocks in the same industry.
Although now in operation for five years, MOTS has still not been able to generate profits and its EPS is expected to remain negative in the coming quarters. Having a market capitalization of $64.98 million, the company relies heavily on its Pure-Vu system, but it’s not certain if the company will be able to survive growing competition in the healthcare space with this system alone. So, we think it’s wise to avoid the stock now.
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MOTS shares were trading at $1.24 per share on Monday morning, down $0.15 (-10.91%). Year-to-date, MOTS has gained 30.80%, versus a 12.27% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...
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