Medical technology company Nemaura Medical Inc. (NMRD - Get Rating) is known primarily for its sugarBEAT device, which has yet to be fully commercialized. While the stock lost 61.1% over the past three years, it has rallied 211.7% year-to-date to close yesterday’s trading session at $11.75. The rally so far this year can be attributed to investors’ optimism surrounding the progress made by the company on its sugarBEAT device.

According to Globe Newswire, the medical device market is expected to hit a $612.7 billion valuation by 2025, growing at a 5.4% CAGR between 2019 – 2025. 

However, NMRD may not be able to capitalize on the industry’s growth due to its weak financials. Also, competition in this space is intense because several other medical device companies are making product innovations and have strategic alliances with established companies to expand their market reach. NMRD is currently trading 28.8% below its $16.50, 52-week high, which it hit on June 19, 2020.

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

Weak Financials

For its fiscal third quarter, ended December 31, 2020, NMRD’s net loss was $1.45 million, compared to a $445,007 net loss in the prior-year period. The increase in its net loss can be attributed primarily to the interest expense on a secured loan note that the company issued on April 15, 2020.

Its general and administrative expenses increased 7.2% year-over-year to $581,520 in the quarter due to increases in costs regarding its commercial product launch. In a shareholder letter published by the company on April 29, 2021 the company’s CEO, Dr. Faz Chowdhury, said that the company is expected to generate revenue in the second quarter of the current financial year. But, considering its current financials, the company’s prospects look uncertain.

Narrow Portfolio of Products

NMRD is mainly dependent on its non-invasive and flexible continuous glucose monitor (CGM) device, sugarBEAT. The company announced on May 6 that the device will be reviewed by the National Association of Statutory Health Insurance Funds for a listing on the durable medical catalogue in Germany. However, NMRD is still completing the application for the review.

Furthermore, NMRD’s CEO said, “In the meantime, we are actively negotiating to identify the right partner to market and distribute the product and our program in this very important market.” So, clearly, the company is still in the early stages of commercialization and it remains to be seen if the device is accepted worldwide.

Taking Loans to Fund Growth Activities

NMRD announced on February 11 that it has secured a $20 million non-dilutive, non-convertible loan secured by its assets and intends to use the proceeds to accelerate its business growth. In July 2020, NMRD priced a  public offering of shares. It is using those proceeds for the development of a second generation of sugarBEAT, among other activities.

POWR Ratings Reflect Bleak Prospects

NMRD has an overall D rating,  which equates to 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. NMRD has a D grade for Growth consistent with analysts’ expectations that its EPS will remain negative in  2021 and 2022.

The stock also has a D grade for Value. This is in sync with its 32.95x forward Price-to-Book, which is 638.8% higher than the 4.46x industry average.

It has an F grade for Quality. This is justified given its negative ROE and ROA.

In addition to the POWR Ratings grades we’ve just highlighted, we’ve also rated NMRD for Momentum, Stability and Sentiment. Get all the NMRD ratings here.

NMRD is ranked #170 out of 183 stocks in the C-rated Medical – Devices & Equipment industry.

Better than NMRD: Click here to access several other top-rated stocks in the same industry.

Bottom Line

NMRD’s sugarBEAT is undergoing its commercial launch but it’s acceptability in the global market is still uncertain. Also, the company is incurring losses and taking loans to fund its growth activities. So, we think it’s wise to avoid the stock now. 

Click here to checkout our Healthcare Sector Report for 2021

NMRD shares were trading at $11.90 per share on Friday morning, up $0.15 (+1.28%). Year-to-date, NMRD has gained 215.65%, versus a 11.72% 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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