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Here's Why You Should Add Surmodics to Your Portfolio Now

Surmodics SRDX is gaining traction on prudent acquisitions along with portfolio expansion. Recent regulatory clearances and progress with TRANSCEND enrollment have also been key growth drivers.

The company, with a market capitalization of $452.8 million, is the leading provider of medical device and In Vitro Diagnostics (IVD) technologies to the healthcare industry. The company anticipates earnings to improve 10% over the next five years. Also, this Zacks Rank #1 (Strong Buy) company has a trailing four-quarter positive earnings surprise of 157.5%, on average.

Let’s delve deeper into the factors working in favor of the company.

Progress With TRANSCEND: Surmodics received IDE approval from the FDA for its SurVeil DCB pivotal study named TRANSCEND.

Surmodics completed the TRANSCEND enrollment in fourth-quarter fiscal 2019 and submitted an application for the CE mark as well. With respect to its CE Mark submission for SurVeil, the company submitted all required modules to the European notified body before the end of fiscal 2019. The TRANSCEND trial enrolled 446 patients at 65 global sites. This is expected to contribute to the company’s growth in the near future.

Regulatory Approvals: During first-quarter fiscal 2020, the company’s Sundance Sirolimus-coated balloon was granted breakthrough device designation status by the FDA. The company is committed toward accelerating the development of these platforms and expects to submit at least three new devices for 510(k) clearance during fiscal 2020.

Moreover, the company continues to target regulatory clearance for POUNCE by late third-quarter fiscal 2020. Additionally, the company received 510(k) clearance of its Sublime guide sheath in fiscal 2019 and expects to secure 510(k) clearance of its 2.5 meter Sublime .014" transradial PTA balloon catheter by third-quarter fiscal 2020.

Strategic Acquisitions: Surmodics has made several acquisitions over the last few years, which have not only diversified its revenue base but also expanded the customer base.In the recent past, Surmodics reached an agreement with Embolitech to acquire an innovative thrombectomy platform and related intellectual property with broad potential peripheral vascular applications. Interestingly, the company has advanced its thrombectomy development with preclinical studies.

Furthermore, Surmodics acquired a privately-held company, NorMedix, a design and development company focused on ultra-thin-walled, minimally-invasive catheter technologies. These deals have bolstered Surmodics’ capability to support key projects and are expected to continue driving growth for the company in the long term.

However, due to ongoing economic volatility on account of the global coronavirus outbreak, the stock is currently underperforming its broader industry. In the past three months, the stock has lost 19.7% compared with the 16.7% decline of its industry.

Estimates Trend

The company is witnessing a positive estimate revision trend for fiscal 2020. Over the past 60 days, the Zacks Consensus Estimate for its loss has narrowed from 25 cents per share to 17 cents per share.

The Zacks Consensus Estimate for the company’s second-quarter fiscal 2020 revenues is pegged at $22.5 million, suggesting a 0.9% fall from the year-ago reported number.

Key Picks

Some other top-ranked stocks from the broader medical space are ResMed Inc. RMD, DexCom DXCM and Integra LifeSciencesInc IART.

ResMed has a projected long-term earnings growth rate of 12%. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

DexCom’s long-term earnings growth rate is estimated at 36.7%. The company presently carries a Zacks Rank #2.

Integra’s long-term earnings growth rate is estimated at 11.9%. It currently carries a Zacks Rank #2.

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