I want to start today’s chat with a tech-investing challenge.
How many of you can claim you have a stock in your portfolio that is up nearly 230% in just 16 months?
As impressive as that return sounds, it actually understates the strength of the stock I have in mind. It’s a medical device leader that recently received approval for a Covid-19 test.
It’s up 120 in the past two months alone…
But this is no flash in the pan. Even before that breakthrough occurred, the stock was a bona fide market crusher
From roughly the beginning of 2019 through the correction that began on February 19, the stock was ahead of the S&P 500 by an amazing 278.5%.
The firm I have in mind is leading the medical device market as part of a trend toward remote patient monitory.
With the coronavirus still fresh on everyone’s minds, the investment thesis is only getting better.
A United Effort
Now then, fighting the coronavirus is clearly an all-hands-on deck affair for both companies and individuals alike.
For instance, True Value Co. shifted from making paint and cleaning supplies at one of its plants to producing hand sanitizer. Clothing companies like Gap and Hanes started producing gowns and scrubs for medical providers.
Right here in my Bay Area neighborhood, folks are trading supplies and making masks that they then donate to local healthcare workers.
And the medical device leader I’ve been telling you about has joined the national effort as well. It may sound like an odd pairing at first.
After all, the firm makes continuous glucose monitors (CGM) used by diabetics.
But it turns out that their devices are providing badly needed relief to the hospitals packed with Covid-19 positive patients.
The CDC approximates that 28% of those hospitalized in the U.S. with the novel coronavirus also have diabetes. People with diabetes need their glucose levels monitored constantly and consistently.
This now poses a threat to nurses who have to manually perform blood-sugar testing on those patients several times a day, each time exposing them to the contagious illness.
Enter our CGM leader.
By utilizing the wearable monitors, hospitals hope to curb transmission as well as conserve the unfortunately scarce supply of protective gear.
Here’s how it works; A tiny sensor wire is inserted under the skin which wirelessly transmits real-time, dynamic glucose information to a smartphone application or receiver device.
The devices send out the data every 5 minutes, resulting in up to 288 readings in a 24-hour period (a great time saver for healthcare staff).
Under normal circumstances, hospitals wouldn’t be ordering remote monitors because they haven’t been officially approved by the FDA for inpatient use.
However, the FDA realizes that these are anything but normal times. And these devices can help ease some of the pressure healthcare providers are experiencing, so the agency is allowing companies to supply them.
The firm started sending out their products to 86 hospitals who have requested the devices in early April. It plans to make around 100,000 sensors specifically for hospitalized coronavirus patients and will also donate about 10,000 phones and receivers.
The effort led to a nice piece of earned media when the Wall Street Journal highlighted the company’s coronavirus work in a recent feature story
This helps explain why the stock has come under so much buying pressure as of late.
Since the stock bottomed out on March 18, it was up roughly 120% as of yesterday. Over the period, that’s more than five times the rally of the S&P 500.
Boosting Earnings and Margins
To be sure, there are concerns about the accuracy and reliability of these CGMs compared to traditional glucose testing methods, especially when being used in conjunction with other aspects of treatment.
But the devices may be very useful for patients with less severe cases of Covid-19. And the firm just released a new version of its glucose checker to be the most accurate ever sold.
Historically, these types of devices had a 15-20% margin of error. Now, that figure has been cut in half.
And the company I’ve been telling you about has been doing well in other areas than just their core CGM system.
The firm has made a deeper push into software with a new portal that helps users upload and view glucose data. Patients also can save, print, or email the reports.
Founded in 1999 and based in San Diego, the company currently treats patients that are on intensive insulin therapy in 47 countries. In the U.S. and Europe alone that accounts for six million people.
The company is working on new products targeted at treating people with earlier-stage diabetes, a market consisting of 60 million people.
By 2023, this market crusher plans to deliver $2 billion to $2.5 billion in sales. They are aiming for profit margins of 25%, suggesting adjusted earnings of at least $500 million.
Now you can see why this is a firm that runs rings around the rest of the med-tech sector and the whole S&P.
I still see plenty of upside potential ahead for this firm. I’m conservatively forecasting earnings growth of an average 24%, meaning they will double in roughly three years.
The Nova-X Report
And if you’d like a shot at the kinds of high-octane tech profits that you can achieve with an ever more in depth level of analysis, then please consider becoming a subscriber of the Nova-X Report.
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And if you’re not ready for this low-priced research service, then check back here as we share tips and strategies on the road to wealth that is high tech.
Cheers and good investing,
Michael A. Robinson