With the rising demand for medical devices for various essential surgeries that were delayed due to the pandemic, and with an increasingly aging population, the medical devices industry has been recovering from pandemic-drive lows. In addition, with the growing integration of new technology in the healthcare sector, along with remote monitoring and connected devices, the industry could generate considerable momentum in the coming months.
The United States is responsible for about half of all global healthcare spending. While the COVID-19 pandemic has heightened the importance of the healthcare sector, it imposed significant supply chain constraints on medical devices companies. However, with the demand for advanced medical devices now recovering, the global medical devices market is expected to reach $623 billion by 2026, growing at a 5% CAGR.
Varex Imaging Corporation (VREX)
VREX in Salt Lake City, Utah, designs and manufactures X-ray imaging components. Medical and Industrial are the company’s two operational segments. It offers its products to end-users directly via imaging system original equipment manufacturers, independent service providers, and distributors.
Last month, VREX expanded its product portfolio by adding the LUMEN 4336W digital radiography detector to its product line. The LUMEN 4336W joins the LUMEN 4343W as a new generation of detectors designed to provide customers and end-users with enhanced durability and simplicity.
Also, last month, VREX announced a $30 million partial redemption of its $300 million senior secured notes due 2027. This demonstrates the company’s robust cash generation and improving financial health.
VREX’s revenue increased 23.4% year-over-year to $211.2 million in its fiscal third quarter, ended July 2, 2021. Its operating income came in at $25.7 million, versus a $26.8 million operating loss in the prior-year period. Its net income amounted to $12 million, compared to a $28.3 million net loss in the third quarter of 2020. The company reported EPS of $0.29, compared to a $0.73 loss per share in the same quarter of the previous year.
VREX’s EPS is expected to increase 1412.5% in the current year. A $807.3 billion consensus revenue estimate for its fiscal year 2021 represents a 9.3% increase from the same period last year. The stock has gained 128.5% in price over the past year and 66.6% year-to-date.
The only Wall Street analyst that provided ratings for the stock rated it Buy. Closing yesterday’s trading session at $27.78, the average analyst price target of $45 represents a potential 62% upside.
VREX’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
VREX has also been rated an A for Growth, and a B for Stability and Value. Additionally, within the Medical – Devices Equipment industry, it is ranked #19 of 184 stocks.
To see additional POWR Ratings for Sentiment, Quality, and Momentum for VREX, click here.
Accuracy Incorporated (ARAY)
ARAY designs, develops, and distributes radiosurgery and radiation therapy equipment to treat tumors. The Sunnyvale, Calif. company offers its CyberKnife Device, robotic stereotactic radiosurgery, a stereotactic body radiation therapy system, and TomoTherapy System, which includes the Radixact System, which is an integrated and flexible radiation therapy system that can be used to treat a variety of cancers.
Last month, the medical care team at Hong Kong Sanatorium & Hospital (HKSH) in Hong Kong treated the first cancer patient in Asia with the ARAY’s Radixact System, the next-generation TomoTherapy platform, and ClearRTTM helical fan-beam kVCT imaging. ARAY aims to prioritize investing in innovative technology that will help provide more effective outcomes for cancer patients.
In its fourth fiscal quarter, ended June 30, 2021, ARAY’s revenue increased 16.8% year-over-year to $110.94 million. Its gross profit grew 10% from its year-ago value to $43.73 million. The company’s cash and cash equivalents increased 8.2% from their year-ago value to $116.37 million.
Analysts expect ARAY’s revenue to increase 3.5% year-over-year to $396.29 million in its fiscal year 2021. Over the past year, the stock has gained 77.7% in price.
Two Wall Street analysts provided ratings for the stock, and both rated it Buy. The $8 consensus price target represents a 101% potential gain from its last closing price of $3.98.
ARAY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. ARAY also has an A grade for Value. The stock is ranked #59 of 184 stocks in the Medical – Devices Equipment industry.
Beyond the POWR Ratings grades we have just highlighted, you can see the ARAY ratings for Sentiment, Stability, Momentum, Growth, and Quality.
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VREX shares were trading at $27.76 per share on Thursday afternoon, down $0.02 (-0.07%). Year-to-date, VREX has gained 66.43%, versus a 20.60% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...
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