Is Inari Medical a Buy?

: NARI | Inari Medical Inc. News, Ratings, and Charts

NARI – Inari Medical, Inc. (NARI) has been losing momentum lately due to its lofty valuation and uncertain growth prospects, despite it making significant progress in product development and the treatment of clot in transit, a rare heart ailment. So, is the stock still a buy? Read more to find out.

Based in Irvine, California, Inari Medical, Inc. (NARI - Get Rating) is a commercial-stage medical devices company that is  involved in the development of therapies for patients suffering from venous diseases. Although the company’s expanding commercial footprint even in the face of the pandemic has helped the stock gain 86.9% over the past nine months, NARI’s shares have retreated 15.8% over the past month.

The company plans to release its earnings results for the fourth quarter and full year 2020 after the market closes on March 9. However, its higher operating expenses in its last reported quarter, together with its  stretched valuation, could lead to further declines in its stock price in the near term.

Although NARI’s FDA approval of  its  FlowTriever system reflects its strong progress and competitive positioning in the market, the stock does not appear to have much upside.

Here is what we think could influence NARI’s performance in the near term:

New FlowTriever System Receives FDA Clearance

In January 2021, NARI’s FlowTriever system, which was developed for the treatment of clot in transit (CIT) in the right atrium, received FDA 510(k) clearance. The development represents the company’s comprehensive and long-term commitment to building products specifically for  the venous system. This strategy could help the company expand its market reach significantly.

Mixed Analyst Estimates

Analysts expect NARI’s EPS to decline 86.7% in the current year but increase at a rate of 10.9% per annum over the next five years. A consensus revenue estimate of $181.5 million for fiscal 2021 represents  a 37.5% improvement year-over-year.

Unimpressive Financials

Although NARI’s revenue has increased 172.2% from the year-ago value to $38.72 million, its general and administrative expenses increased 128.5% year-over-year to $23.08 million in the third quarter, ended September 30, 2020. Moreover, the company’s research and development expenses increased 203% year-over-year to $5.22 million. The increase in operating expenses was due mainly  to personnel-related expenses to fund the expansion of its commercial and other  expenses related to being a public company. The company’s interest expenses increased 11.1% year-over-year to $251,000 over this period.

Stretched Valuation

In terms of forward PEG, NARI is currently trading at 56.62x, versus an  industry average 1.93x. Its trailing-12-month ev/ebitda  of 293.76x is 1322.6% higher than the industry average  20.65x. Also, its trailing-12-month price/cash flow of 1685.05x is significantly higher than the industry average 19.17x.

POWR Ratings Indicate Uncertain Prospects

NARI has an overall rating of C, which equates to Neutral 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. Among these categories, NARI has a grade of C for Momentum, which is consistent with its price decline over the past month.

In terms of Quality Grade, the stock has an A. This is in sync with NARI’s gross profit margin of 90.7%, which is 61.9% higher than the industry-average of 56%.

Also, it has a grade of D for Value, given its stretched valuation.

NARI is currently ranked #70 of 181 stocks in the C-rated Medical – Devices & Equipment group. In addition to the grades I’ve highlighted, you can check out NARI’s POWR Ratings for Growth, Stability, and Sentiment here.

If you’re looking for better stocks in the Medical – Devices & Equipment group, with an Overall POWR Rating of A or B, you can access them here.

Bottom Line

Despite NARI’s impressive progress and meaningful investments in new technology, its higher operating expenses and mixed growth prospects could cloud its potential and cause the  stock to see further declines in the near term. While the FDA clearance for NARI’s newly developed FlowTriever system could help the company to grow its commercial footprint substantially, its sky-high valuation makes it a risky pick at this point. So, we think investors should wait for better entry points in the stock.

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NARI shares were trading at $93.63 per share on Monday morning, down $0.12 (-0.13%). Year-to-date, NARI has gained 7.26%, versus a 3.00% rise in the benchmark S&P 500 index during the same period.


About the Author: Imon Ghosh


Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...


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