Medical device equipment manufacturer NanoVibronix, Inc. (NAOV) in Elmsford, N.Y., has been gaining momentum lately, driven by positive news regarding the efficacy of its product UroShield. 

The stock has gained 232.5% in price since the release of this news on July 22 to close yesterday’s trading session at $2.66. It hit its 52-week high of $4.19 on August 17. In addition, NAOV has gained 219.3% over the past three months and 248.2% year-to-date.

On July 22, NAOV announced that The Journal of Medical and Surgical Urology is in the process of publishing an article containing the overwhelmingly positive findings from a real-world study demonstrating the efficacy of UroShield for treating UTI infections. Regarding this, NAOV CEO Brian Murphy said, “As we would expect, the patient experiences in the study were statistically significant, with all responding patients reporting that our device was simple, easy to use and materially benefitted them. The patient experiences were so profoundly positive that 100% of the study’s participants are continuing to use the device following the conclusion of the study.”

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

Product Launches

NAOV is currently launching over-the-counter products Painshield Plus and PainShield RELIEF, thereby expanding its addressable market. However, NAOV’s trademark application for PainShield RELIEF has  yet to be approved by the U.S. Patent and Trademark Office. Also, the company hasn’t yet applied for clearance from the FDAt. Thus, it could  take some time for NAOV’s new product launch to yield results.

Negative Profit Margins

NAOV’s revenues have increased 15.8% year-over-year to $661,000 over the past year. However, the company has  yet to generate adequate net profits. Its trailing-12-month net loss and loss per share came in at $7.06 million and $0.37, respectively. In addition, the company’s trailing-12-month EBITDA loss stood at $4.65 million. Its trailing-12-month ROE, ROTC, and ROA are negative 418.1%, 165.1%, and 103.3%, respectively.

In addition, NAOV’s trailing-12-month CapEx/Sales and Asset Turnover Ratio of 0.61% and 0.17%, respectively,  are significantly lower than the 3.98% and 0.36% industry averages.

In its  fiscal second quarter, ended June 30, NAOV’s net loss was $216,000, reflecting an 85.6% decline. However, this reduction in net loss can be attributed to a $706,000 gain due to a change in the fair value of its derivatives liabilities. NAOV’s cash and cash equivalents balance decreased 20.6% in the first six months of 2021 to $5.67 million as of June 30. Its current assets fell 17.4% over this period to $6.58 million. Also, net operating cash outflows have amounted to $4.88 million over the past year.

Stretched Valuation

In terms of trailing-12-month EV/Sales, NAOV is currently trading at 95.17x, which is 1150.5% higher than the 7.61x industry average. Likewise, its 15.93 trailing-12-month Price/Book multiple is 300.9% higher than the 3.97 industry average.

Furthermore, the stock’s 76.05 trailing-12-month Price/Sales ratio is 813.5% higher than the 8.32 industry average.

POWR Ratings Reflect Bleak Prospects

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

NAOV has an F grade for Value and a D grade for Quality. Its premium valuation and negative profit margins justify the Value and Quality grades.

Of the 185 stocks in the Medical – Devices & Equipment industry, NAOV is ranked #169.

In addition to the grades I’ve highlighted, one  can view NAOV ratings for Growth, Momentum, Stability, and Sentiment here.

Bottom Line

NAOV has been actively investing in research and development and has promising products in its pipeline. However, we think it might take a while for the company to commercialize these products. Moreover, with negative cash flows and poor profit margins, financing its product launches might be challenging, which makes its current valuation unsustainable. Thus, the stock is best avoided now.

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

While NAOV has a D (Sell) rating in our proprietary rating system, one  might want to consider taking a look at its industry peers, Utah Medical Products, Inc. (UTMD), Getinge AB (GNGBY), and Fonar Corporation (FONR), which have an A (Strong Buy) rating.

Click here to checkout our Healthcare Sector Report for 2021

NAOV shares were trading at $2.69 per share on Thursday afternoon, up $0.03 (+1.13%). Year-to-date, NAOV has gained 252.05%, versus a 22.06% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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