The United States is the world’s largest medical device market, which is expected to improve further aided by a long track record of chronic diseases. Also, with the suspension of the controversial 2.3% medical device tax for another two years, this industry is currently riding high on optimism. Per a research by Emergo, the U.S. Medical Device industry is projected to reach a market value of $173 billion by 2019.
Notably, both stocks carry a Zacks Rank #2 (Buy), which raises investors’ optimism. These stocks also have a VGM Score B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, are profitable picks.
Here, we make a detailed analysis of the companies’ fundamentals to determine which stock is currently positioned better in the Medical Products space.
With a market cap of $60.74 billion, Stryker is one of the leading medical device companies operating in the global orthopedic market.
On the other hand, based in Minnesota, Surmodics is a leading provider of medical device and In Vitro Diagnostics (IVD) technologies. The company has a market cap of $723.9 million.
In the past year, Stryker’s shares have gained 17.4% compared with the industry’s rise of 13%. The stock has also surpassed the S&P 500 index’s increase of 14%.
Meanwhile, shares of Surmodics have skyrocketed 122.2% in this period.
The Zacks Consensus Estimate for Stryker’s current-year earnings is pegged at $7.23 per share, which reflects projected growth of 11.4%.
The same for Surmodics is pegged at 2 cents, indicating decline of 103.9%.
Moreover, since 2009, Stryker’s earnings per share have witnessed a CAGR of 10.4% to $6.49 in 2017. Surmodics’ earnings projected a negative CAGR of 9% and totaled 51 cents in 2017.
Hence, Stryker wins this round.
The Zacks Consensus Estimate for Stryker’s current-year revenues is pegged at $13.61 billion, showing growth of 9.3%. The same for Surmodics is pinned at $78.4 million, reflecting growth of 7.3%.
Since 2009, Stryker’s revenues witnessed a CAGR of 8% and reached $12.44 billion in 2017. Surmodics’ revenues depicted a negative CAGR of 6.2% in 2017.
Here too, Stryker wins over Surmodics.
Factors Driving the Stocks
Stryker’s robotic-arm assisted Mako surgery platform has been consistently driving the top line. In the last reported quarter, the platform recorded 28 new robot installations, globally. Notably, the Mako TKA knee platform drove the Orthopaedic segment, which delivered an organic growth of 2.5% recently.
The company raised guidance for the second quarter of 2018, which buoys optimism.
Surmodics has been on an acquisition spree. Recently, the company announced that it has reached an agreement with Embolitech to acquire an innovative thrombectomy platform technology. This is likely to enhance the company’s focus on developing highly differentiated whole-product solutions for its medical device customers.
Recently, the company received approval from the FDA for its .018” Low-Profile percutaneous transluminal angioplasty (PTA) balloon dilation catheter. Notably, the device is designed for a broad range of peripheral vascular applications.
Moreover, a partnership with the MedTech bigwig Abbott, is also a major positive.
Our comparative analysis indicates that Stryker is positioned better than Surmodics, considering price performance as well as earnings and sales growth.
Other Key Picks
Genomic Health has an expected earnings growth rate of 187.5%. The stock flaunts a Zacks Rank of 1.
Intuitive Surgical has an expected long-term earnings growth rate of 12.1% and sports a Zacks Rank #1.
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