Medical technology company Senseonics Holdings, Inc. (SENS) is known for its continuous glucose monitoring systems (CGMs) that are  popular with diabetics, primarily in Europe. With people now more at risk now from reduced physical activity, a risk that has been heightened  by the remote lifestyles necessitated by coronavirus lockdown measures, the demand for medical technology devices has increased significantly. This has allowed SENS to gain 326.7% year-to-date, and 926.5% over the past three months.

However, SENS has failed to capitalize on this tailwind to boost its sales volume or increase its market reach, and as such its stock has been advancing based on investor optimism alone.

SENS  revenues  82.2% year-over-year in the third quarter ended September 30, 2020. Also,  the company reported a net loss of $23.43 million over this period.

Here’s what we think could shape SENS’ performance in the upcoming months:

Trading at a Sky-High Valuation

In terms of forward price/sales, SENS is currently trading at 377.51x, 3713.7% higher than the industry average  9.90x. SENS’ forward ev/sales of 385.99x is significantly higher than the industry average  9.12x.

Sub-Par Financials

SENS has generated $10.02 million in  revenue over the past year. However, the company has a market capitalization of a whopping $1.39 billion. It has reported losses in the trailing 12-months and has failed to generate positive cash flows during  this period. The company has reported $109.15 million as net losses over this period, with a net operating cash flow of negative $93.73 million.

SENS’ trailing 12-month gross profit margin of negative 281.42% compares to the industry average of 55.91%. Moreover, its trailing 12-month ROA and ROTC margins are negative.

Consensus Price Target Indicates Potential Downside

SENS has gained 158.3% over the past year to close yesterday’s trading session at $3.72. However, analysts expect to stock to decline 76.3% to hit $0.88 soon.

POWR Ratings Reflect Bleak Outlook

SENS has an overall rating of D, which equates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with the weighting of each optimized to improve overall performance.

Our proprietary rating system also evaluates each stock on eight different categories. The company has an F grade for Quality, Sentiment and Stability, and a D for Value. This is justified given its earnings and revenue history and current valuations. Furthermore, analysts expect the stock’s EPS to remain negative throughout this year. A consensus revenue estimate for the year ended December 2020 represents  an 80.7% decline year-over-year.

Of the 60 stocks in the C-rated Medical – Diagnostics/Research industry, SENS is ranked #55. In addition to the grades I’ve just highlighted you can check out additional POWR Ratings for Growth and Momentum here.

Click here to check out the top-rated stocks in the Medical – Diagnostics/Research industry.

Bottom Line

SENS triple digit price gains over the past year have come despite declining financials that indicate that the stock is a highly speculative investment. Though the company’s recent secondary public offering, which generated $115 million gross proceeds, should help it expand its portfolio, we think it will  take some time for the company to witness adequate returns.

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SENS shares were trading at $4.22 per share on Wednesday afternoon, up $0.50 (+13.44%). Year-to-date, SENS has gained 384.06%, versus a 4.81% 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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