NanoVibronix, Inc. (NAOV - Get Rating) in Elmsford, N.Y., is a medical device company that specializes in developing medical devices based on its unique low-intensity surface acoustic wave (SAW) technology. The company’s primary products are PainShield and UroShield, which are portable devices that may be used at home without the intervention of medical personnel.

The company’s shares have gained 46.6% in price over the past month after NAOV received approval for PainGuard and UroGuard as licensed medical devices from Health Canada /Santé Canada.

However, the stock has declined 34.8% over the past six months. Furthermore, NAOV’s poor bottom-line performance and premium valuation could add to investors’ concerns about its near-term prospects.

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

Poor Bottom line Performance

NAOV’s revenue increased 232.7% year-over-year to $499,000 for the three months ended Sept. 30, 2021. However, its operating loss increased 7.9% from its year-ago value to $868,000. Its net loss grew 623.9% from the prior-year quarter to $6.68 million, while its loss per share came in at $0.26 for the period.

Premium Valuation

In terms of trailing-12-months Price/Sales, the stock is currently trading at 27.25x, which is 365.2% higher than the 5.86x industry average. Also, its 24.61x trailing-12-months EV/Sales is 369.8% higher than the 5.24x industry average. Furthermore, NAOV’s 3.79x trailing-12-months Price/Book is 39.6% higher than the 2.72x industry average.

Poor Profitability

NAOV’s 0.15% trailing-12-months asset turnover ratio is 57.1% lower than the 0.34% industry average. Its 53.4% trailing-12-months gross profit margin is 3.97% lower than the 55.6% industry average. Also, its trailing-12-months ROA, levered FCF margin, and ROC are negative at 132.6%, 277.8%, and 48.9%, respectively.

POWR Ratings Reflect Uncertainty

NAOV has an overall F rating, which equates to a Strong 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.

Our proprietary rating system also evaluates each stock based on eight distinct categories. NAOV has an F grade for Value and a D for Quality. The company’s higher-than-industry valuation is consistent with the Value grade. In addition, its poor profitability is in sync with the Quality grade.

Among the 166 stocks in the D-rated Medical – Devices & Equipment industry, NAOV is ranked #160.

Beyond what I have stated above, one can view NAOV ratings for Stability, Momentum, Growth, and Sentiment here.

Bottom Line

While NAOV’s recent product launches and its continued effort to receive further clearance for its products have garnered significant investor attention and led to the stock’s price rally, investors could get concerned about NAOV’s prospects based on its lack of profitability. Furthermore, the stiff competition in the medical devices industry could further mar its growth prospects. Therefore, we believe the stock is best avoided now.

How Does NanoVibronix Inc. (NAOV) Stack Up Against its Peers?

While NAOV has an overall D rating, one might want to consider its industry peers, Fonar Corporation (FONR - Get Rating), Natus Medical Incorporated (NTUS - Get Rating), and Electromed Inc. (ELMD - Get Rating), which have an overall A (Strong Buy) rating.

Click here to checkout our Healthcare Sector Report for 2022

NAOV shares fell $0.02 (-1.83%) in premarket trading Wednesday. Year-to-date, NAOV has gained 4.81%, versus a -4.74% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...

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