Surgalign vs. Asensus Surgical: Which Medical Equipment Stock is a Better Buy?

: SRGA | Surgalign Holdings, Inc. News, Ratings, and Charts

SRGA – The medical equipment industry has been growing at a healthy clip this year, with rising demand for elective surgeries that had been on hold during the worst of the COVID-19 pandemic last year. So, two established medical equipment companies, Asensus (ASXC) and Surgaline (SRGA), should benefit in the coming months. But let’s see which of these two stocks is a better buy now.

Asensus Surgical, Inc. (ASXC) in Morrisville, N.C., and Surgalign Holdings, Inc. (SRGA) in Deerfield, Ill., are two established players in the medical equipment space. ASXC is a medical device company that digitizes the interface between the surgeon and the patient to improve minimally invasive surgery through digital laparoscopy. It enables the use of advanced capabilities, such as  augmented intelligence, connectivity and robotics in laparoscopy, and addresses the current clinical, cognitive, and economic shortcomings in surgery. SRGA is a medical technology company that designs, develops, manufactures and distributes biologic, metal and synthetic implants. Its product portfolio includes cervical fixation, The Streamline (TL) fixation, motion preservation, orthobiologics, cervical inter-body fusion, TL IBF, and SI joint fusion.

The medical equipment industry suffered a big decline in demand amid the pandemic last year due to the postponement of several elective surgeries as hospitals focused overwhelmingly on treating patients with COVID-19. However, with the success of a widespread vaccination program this year, which has reduced COVID-19 cases significantly, the demand for elective surgeries is on the rise. Consequently, medical equipment companies are benefiting. And investors’ keen interest in the medical equipment stocks is evident in the SPDR S&P Health Care Equipment ETF (XHE) 14.1% returns so far this year.

According to a Fortune Business Insights report, the global medical devices market is projected to grow at a 5.4% CAGR to $657.98 billion in 2028. As such, ASXC and SRGA could witness increasing demand for their products and services.

Click here to checkout our Healthcare Sector Report for 2021

While ASXC has gained 705% over the past year, SRGA retreated 55%. Furthermore,  in terms of their past months’ performance, ASXC is a clear winner with 17.2% returns versus SRGA’s 22.8% loss. But which of these two stocks is a better pick now? Let’s find out.

Latest Movements

On June 28, 2021, ASXC announced that Inselspital, University Hospital in Bern, Switzerland had initiated its Senhance Surgical System program. ASXC’s Senhance Surgical System technology platform leverages augmented intelligence that will  be of assistance in many high-value, complex reconstructive surgeries. As a result, ASXC expects to gain good market reach across the Inselspital University hospital group. Also in June, SRGA entered a strategic collaboration  with Inteneural Networks Inc., a medical high-tech company specializing in AI and Big Data Learning analysis of brain imaging. Under the agreement, SRGA will gain access to Inteneural’s proprietary technology to  evaluate its  future integration within the SRGA’s digital surgery portfolio. Both the companies are looking forward to a long-term partnership to  capitalize on the new developments  in  AI application in neurosurgery and medical imaging.

Recent Financial Results

ASXC’s total revenue increased 247.2% year-over-year to $2.08 million for its fiscal first quarter, ended March 31, 2021. The company’s adjusted net loss came in at $12.24 million, which represents a 2.3% rise from the prior-year period. However, its net loss per common share decreased 85.4% year-over-year to $0.06.

For its fiscal first quarter ended March 31, 2021, SRGA’s sales were  $23.29 million, which represents a 14.1% decrease from the prior-year quarter. The company’s adjusted net loss for the quarter was $12 million, which represents a 38.1% year-over-year decline. Its adjusted net loss per share decreased 55.6% year-over-year to $0.12.

Past and Expected Financial Performance

ASXC’s revenue has declined 33% over the past year but is expected to increase 106.9% for the current year and 146.7% next year. The company’s EPS is expected to decrease 57% in the current year and 7.4% next year.

In comparison, SRGA’s revenue has increased 31.5% over the past year. Analysts expect SRGA’s revenue to increase 6% in the current year and 13% next year. Its EPS is expected to increase 15.7% in the current year and 14% next year.

Profitability

SRGA’s $97.94 million in trailing-12-month revenue is 21 times ASXC’s $4.66 million. SRGA is also more profitable, with a 61.2% gross profit margin versus ASXC’s negative returns.

Valuation

In terms of TTM Price/Sales, ASXC is currently trading at 72.23x, 6180.9% higher than SRGA’s 1.15x. In terms of TTM EV/Sales, ASXC’s 124.78x is 9353% higher than SRGA’s 1.32x.

So, SRGA is the more affordable stock.

POWR Ratings

ASXC has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. However, SRGA has an overall C rating of C, which represents Neutral. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

ASXC has a grade of D for Quality. This is justified due to  its negative value for trailing-12-month gross profit margin compared to the 55.9% industry average. SRGA, in comparison,  has a C grade for Quality. This is in sync with its 61.2% trailing-12-month gross profit margin, which is 9.7% higher than the 55.9% industry average.

ASXC has a D grade for Value also. This is in keeping with its 93.25x forward EV/Sales, which is 1189.3% higher than the 8.41x industry average. SRGA has a grade of B for Value, which is consistent with its 1.21x forward EV/Sales, which is 83.3% lower than the 7.23x industry average.

Of the 184 stocks in the Medical-Devices & Equipment industry, SRGA is ranked #113 and ASXC is ranked #160.

In addition to the POWR Ratings grades we’ve just highlighted,  ASXC and SRGA have also been rated for Growth, Stability, Sentiment, and Momentum. Click here to see the additional ratings for ASXC. Also, get all SRGA’s ratings here.

The Winner

While SRGA’s valuation seems to be justified based on its financials and growth prospects, we think ASXC could be a risky bet now. However, investors would be wise to wait for better entry points before betting on SRGA too.

Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to learn about top-rated stocks in the Medical-Devices & Equipment industry.

Click here to checkout our Healthcare Sector Report for 2021


SRGA shares were trading at $1.39 per share on Friday afternoon, down $0.00 (-0.36%). Year-to-date, SRGA has declined -36.53%, versus a 16.65% rise in the benchmark S&P 500 index during the same period.


About the Author: Ananyo Guha Niyogi


Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More...


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