In today’s rapidly evolving world, the healthcare industry is experiencing a significant transformation.
With an aging global population, a surge in chronic diseases, and groundbreaking technological advancements, the medical device sector is poised for remarkable growth and expansion.
In this article, we’ll delve into the promising world of medical device stocks, with a particular focus on two contenders:
T2 Biosystems (TTOO) and IDEXX Laboratories (IDXX). The big question is, which stock is primed for better gains this month? Let’s dive in and find out.
The Healthcare Boom: A Lucrative Opportunity
The healthcare landscape is undergoing a seismic shift due to several factors.
The aging population worldwide, the rising prevalence of chronic diseases such as diabetes, cancer, and cardiovascular issues, and the growing emphasis on early diagnosis and treatment by governments and healthcare agencies are all contributing to the soaring demand for medical devices.
For instance, the number of diabetes cases is projected to skyrocket from 529 million to a staggering 1.30 billion by 2050. This surge will drive the demand for wearable and portable medical devices to monitor and manage this condition.
According to a report by Fortune Business Insights, the global medical devices market is anticipated to reach an impressive $799.67 billion by 2030, with a Compound Annual Growth Rate (CAGR) of 5.9% during the forecast period of 2023-2030.
Meanwhile, the U.S. medical devices market is expected to grow from $192.78 billion in 2023 to $291.04 billion by 2023, exhibiting a CAGR of 6.1%.
Moreover, the medical device industry is benefiting immensely from technological advancements, particularly the integration of artificial intelligence (AI) into healthcare devices.
AI-based medical devices are revolutionizing healthcare by enhancing diagnostic accuracy, personalizing treatment plans, aiding in surgical procedures, and overall, improving patient care.
These devices also offer the added benefit of reduced radiation exposure for patients, compared to earlier iterations.
The Internet of Things (IoT) and 3D printing have also found their way into the medical device industry, further propelling its growth.
As per a report by Research and Markets, the global AI in medical devices market is expected to soar to $66.35 billion in 2027, boasting an astonishing CAGR of 44%.
With such favorable industry dynamics, both T2 Biosystems (TTOO) and IDEXX Laboratories (IDXX) are set to benefit.
IDXX Takes the Lead in Price Performance
When it comes to price performance, IDEXX Laboratories (IDXX) clearly takes the lead. Over the past nine months, IDXX has achieved an impressive 1.9% return, while T2 Biosystems (TTOO) has experienced an 88% decline.
Year-to-date, IDXX has gained 5.5%, whereas TTOO has plummeted by 86.4%. Looking back over the past year, IDXX boasts gains of 23.5%, in stark contrast to TTOO’s staggering decline of 96.4%.
Why IDXX Shines Bright
IDXX’s performance isn’t just limited to stock prices; it also excels in other crucial aspects:
Latest Developments
On September 19, TTOO received FDA 510(k) clearance for its T2Biothreat™ Panel. This clearance allows the company to market and sell the T2Biothreat Panel in the U.S.
This panel is the first FDA-cleared product capable of detecting six high-priority biothreat pathogens simultaneously, marking a significant milestone in TTOO’s collaboration with the U.S. Government.
On June 15, IDXX launched the first veterinary diagnostic test for detecting kidney injury in cats and dogs, known as the IDEXX Cystatin B Test.
This innovative test will provide valuable insights into renal health during approximately two million patient visits annually, enhancing treatment outcomes for pets.
The IDEXX Reference Laboratories will begin running these tests later this year in the U.S. and Canada, with plans for introduction in Europe in 2024.
Recent Financial Results
For the second quarter ending June 30, 2023, TTOO reported a year-over-year revenue decrease of 66.8% to $1.96 million, with a loss from operations of $13.05 million. In addition, its net loss and net loss per share stood at $6.35 million and $0.08, respectively.
In contrast, IDXX reported a 9.7% year-over-year revenue increase to $943.63 million for the same period. Its gross profit grew by 11.4% to $572.85 million.
Furthermore, its income from operations surged by 66.5% year-over-year to $296.14 million, with net income attributable to stockholders and EPS rising by 69.9% and 71.2% year-over-year to $224.24 million and $2.67, respectively.
TTOO & IDXX’s Past and Expected Financial Performance
TTOO’s revenue has shown a three-year CAGR of 10.3%. However, its total assets have declined at an 11.6% CAGR over the same period. For the fiscal year ending December 2023, TTOO’s revenue is projected to decrease by 55.2% year-over-year to $10 million.
Analysts also expect negative EPS for the next two fiscal years. Nonetheless, the company’s revenue for the fiscal year 2024 is estimated to increase by a remarkable 152.5% year-over-year to $25.25 million.
In the past three years, IDXX has experienced impressive growth, with revenue and EBITDA showing CAGRs of 12.4% and 18.5%, respectively.
Net income and EPS have also seen strong growth at respective CAGRs of 19.8% and 21.3% over the same time frame, while total assets have grown at a 13.6% CAGR.
Analysts predict IDXX’s revenue and EPS for the fiscal year ending December 2023 to increase by 9.4% and 22.4% year-over-year to $3.68 billion and $9.83, respectively.
For the fiscal year 2024, the company’s revenue and EPS are expected to grow by 10.1% and 13.3% from the previous year to $4.06 billion and $11.13, respectively.
Profitability
IDXX outshines TTOO in terms of profitability. IDXX’s trailing-12-month revenue is an astounding 265.9 times greater than that of TTOO. Furthermore, IDXX boasts a trailing-12-month gross profit margin of 59.97%, while TTOO languishes at a negative 233.95%.
IDXX’s trailing-12-month levered Free Cash Flow (FCF) margin of 14.56% also far surpasses TTOO’s negative 172.48%.
IDXX’s trailing-12-month Return on Assets (ROA) and Return on Total Capital (ROTC) stand at 29.96% and 31.16%, respectively, while TTOO languishes with negative 140.56% and negative 146.73%, respectively.
Valuation
In terms of forward EV/Sales, IDXX currently trades at 10.04x, which is 9.5% lower than TTOO’s 11.10x. However, IDXX’s trailing-12-month Price/Sales multiple of 10.24 is considerably higher than TTOO’s 0.42.
POWR Ratings
When it comes to ratings, TTOO has an overall rating of D, equivalent to a Sell in our proprietary POWR Ratings system. On the other hand, IDXX boasts an overall rating of B, indicating a Buy.
Our proprietary rating system considers 118 different factors, each appropriately weighted.
The Verdict: IDXX is the Clear Winner
In conclusion, the medical device industry is on a promising trajectory, driven by the escalating prevalence of chronic diseases, a rapidly growing aging population, and the increasing focus on timely patient diagnosis and treatment.
Technological advancements in medical devices are further fueling this industry’s growth.
While both T2 Biosystems (TTOO) and IDEXX Laboratories (IDXX) stand to benefit from these favorable industry dynamics, IDXX takes the lead due to its robust financial performance, profitability, and brighter growth prospects.
As investors, it’s crucial to remember that success rates tend to be higher when we invest in stocks with an Overall Rating of Strong Buy or Buy.
In the dynamic world of healthcare, IDEXX Laboratories emerges as the clear winner in the battle of medical device stocks, offering investors a promising opportunity for growth and profitability.