TransMedics (NASDAQ:TMDX) has emerged as a prominent player in the medical field, witnessing a remarkable surge from $14 to $90 in a little over 18 months.
The company’s core expertise lies in organ care systems, which preserve transplant organs post-donor retrieval. It further distinguishes itself by offering comprehensive clinical-level support to transplant centers and is a full-service provider for transplantation logistics.
The catalyst for TransMedics’ growth this year was its Q1 earnings report, which resulted in an astonishing 162% yoy revenue pop to over $41 million. While the gross margin remained high at nearly 70%, it experienced a slight decline, down 6 percentage points in the same quarter of the previous year.
However, the silver lining came with significantly reduced quarterly losses; Q1 net loss dropped from around $10 million in 2022 to just north of $2 million this year.
The question now is whether TMDX will continue to soar, or the good news if fully priced in?
- TransMedics has experienced significant growth with its stock price surging by over 500% in a year and a half.
- The company is growing sales at a rapid pace while keeping impressive margins, suggesting it is handling the scale opportunity well.
- On a pullback, Transmedics is well worth considering for its future potential.
The Future for Transmedics
The company’s prospects for expansion received an added boost from the announcement to acquire charter flight operator Summit Aviation on August 1st. This strategic move positions TransMedics as a nationwide solution for organ transplant transportation logistics, complementing its existing business and opening doors to higher revenues and future earnings.
Assessing TransMedics as a potential investment, the recent selloff on the news that CEO Waleed Hassanein sold 7,500 shares does not appear justified given the company’s improving fundamentals. With its triple-digit revenue gains and inching closer to profitability, TMDX is an attractive opportunity for risk-seeking investors.
Is TMDX Worth Investing In?
While TransMedics shows promise as a good stock to buy, it must be acknowledged that it currently trades at a significant multiple to earnings.
To sustain such elevated levels, management must improve net margins and sustain high revenue growth rates. Thus far, they have been successful on both of these counts, but continued diligence will be crucial for long-term success.
By the end of the next fiscal year, analysts forecast quarterly earnings to eclipse $0.20 per share. Should the company sustain a sufficiently high growth rate, these expectations should be hit.
TransMedics appears to be moving in the right direction, with its revenue growth and move towards profitability signaling a bright future.
Management is also exploring expansion opportunities beyond the US market, capitalizing on the increasing demand for organ transplants, which are estimated to rise annually at a CAGR of almost 10% through the end of the decade.
Considering its substantial revenue growth, potential for profitability, and current pullback buying opportunity, TransMedics may prove an enticing investment for growth-oriented investors.