What medical equipment inventory is a better buy?

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Asensus Surgical, Inc. (ASXC) in Morrisville, North Carolina, and Surgalign Holdings, Inc. (SRGA) in Deerfield, Ill., are two established players in the medical equipment business. ASXC is a medical device company that digitizes the interface between surgeon and 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 fills current clinical, cognitive and economic gaps in surgery. SRGA is a medical technology company that designs, develops, manufactures and distributes biological, metallic and synthetic implants. Its product portfolio includes Cervical Fixation, Streamline Fixation (TL), Motion Preservation, Orthobiology, Inter-Body Cervical Fusion, TL IBF, and SI Joint Fusion.

The medical equipment industry suffered a sharp drop in demand amid the pandemic last year due to the postponement of several elective surgeries, with hospitals focusing heavily on treating patients with COVID-19. However, with the success of a widespread vaccination program this year, which has significantly reduced cases of COVID-19, the demand for elective surgeries is increasing. Therefore, medical device companies are taking advantage. And the strong investor interest in 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 expected to grow at a 5.4% CAGR to $ 657.98 billion in 2028. As such, ASXC and SRGA may experience increasing demand for their products and services.

Click here to view our health sector report for 2021

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

Latest movements

On June 28, 2021, ASXC announced that Inselspital, the university hospital in Bern, Switzerland, had launched its Senhance Surgical System program. ASXC’s Senhance Surgical System technology platform harnesses augmented intelligence that will be useful in many complex and high-value reconstructive surgeries. As a result, ASXC expects to gain good reach in the Inselspital university hospital group market. Also in June, SRGA entered into a strategic collaboration with Inteneural Networks Inc., a high-tech medical company specializing in AI analysis and brain imaging big data learning. Under the agreement, SRGA will have access to Inteneural’s proprietary technology to assess its future integration into SRGA’s digital surgery portfolio. The two companies look forward to a long-term partnership to capitalize on new developments in AI applications in neurosurgery and medical imaging.

Recent financial results

ASXC’s total revenue increased 247.2% year-on-year to $ 2.08 million for its fiscal first quarter ended March 31, 2021. The company’s adjusted net loss was $ 12.24 million, an increase of 2.3% over the previous year. However, its net loss per common share declined 85.4% year-over-year to $ 0.06.

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

Past and expected financial performance

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

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

Profitability

SRGA’s revenue of $ 97.94 million over the past 12 months is 21 times greater than ASXC’s $ 4.66 million. SRGA is also more profitable, with a gross profit margin of 61.2% against the negative returns of ASXC.

Evaluation

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

Thus, SRGA is the most affordable stock.

POWR odds

ASXC has an overall D rating, which is equivalent to selling in our property POWR odds system. However, SRGA has an overall C rating of C, which represents Neutral. POWR ratings assess stocks based on 118 different factors, each with its own weight.

ASXC has a grade of D for quality. This is justified because of its negative value for the gross profit margin of the past 12 months compared to the industry average of 55.9%. SRGA, by comparison, has a C rating for quality. This is in line with its gross profit margin of 61.2% over the past 12 months, which is 9.7% above the industry average of 55.9%.

ASXC also has a D rating for value. This is in line with its EV / Futures sales of 93.25x, which is 1,189.3% above the industry average of 8.41x. SRGA has a B rating for value, which is consistent with its EV / Futures sales 1.21x, which is 83.3% below the industry average 7.23x.

Of the 184 shares of Medical devices and equipment industry, SRGA is ranked # 113 and ASXC is ranked # 160.

In addition to the POWR ratings just highlighted, the ASXC and SRGA were also rated for growth, stability, sentiment and momentum. Click on here to see additional notes for ASXC. Also get all SRGA ratings here.

The winner

While SRGA’s valuation appears to be justified on the basis of its financial and growth outlook, we believe ASXC could be a risky bet now. However, investors would be wise to wait for better entry points before betting on SRGA as well.

Our research shows that the odds of success increase when betting on stocks with an overall buy or strong buy POWR rating. Click on here to learn more about the top rated stocks in the medical devices and equipment industry.

Click here to view our health sector report for 2021


SRGA shares were trading at $ 1.39 a share on Friday afternoon, down $ 0.00 (-0.36%). Year-to-date, the SRGA has fallen -36.53%, compared to a 16.65% increase in the benchmark S&P 500 over the same period.

About the Author: Ananyo Guha Niyogi

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

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