paying attention can miss it. Growth is again catching a bid. Growth is beginning to growth again, with conviction. Again we pose the question we first raised when this piece ran in early August. No one out-performs Amazon.
Or do they?
ABIOMED is a company with heart. They make them–temporary percutaneous mechanical circulatory support devices. If you’re one of the many people with any of a variety of cardiac issues, this company may just help you heal. That’s whet CEO and President Michael Monogue will tell you.
Abiomed’s blood pumps create blood flow when the heart needs assistance. It’s ABMD’s time as well. Born in 1997 this Danvers Mass-based company originally sought the artificial heart, a pedigree continuing to provide both direction and inspiration. That tight focus clearly shows in the financial metrics ABMD is now producing. There’s heart here, and it’s early days.
just rocked another sizzling beat. However this time was different–better, and even better than that. “Back up sucker.” The shoving stopped and ABMD released a fat heaping file. A bundle full of Q1, 2019 goodies landed right on the trading desk. Yes, Q1, 2019 is correct. The hump of analysts gasped with raised arms. Some saw stars. The numbers the analysts saw were correct too.
It’s sick how many killer healthcare plays there are popping into view. We know of three–all ramping right now. ABIOMED’s just one. But then–138% EPS beat, on record revenue, up 36%. That gets us pumping.
Investors love Netflix. Why? Because NFLX owns SVOD and the entire world is rapidly becoming their stage. Thanks Reed. Liner ad-driven television is over. Netflix is that growth front. Investors are loving ABMD as well. Why? Because Abiomed is growing–everything. So NELX and ABMD are equals? Hardly. Three stunning factors distinguish ABMD from the wholly wonderful NFLX.
1. Zero debt.
Netflix operates in what’s known as a “capital intensive” business. Such requires an on-going fire-hose of content spending. Debt is what fuels that stellar growth. Collective debt in the out years is increasingly analyst’s concern for NFLX. While Reed Hastings and gang continue piling on debt, Abiomed, well, doesn’t. In fact, ABMD has no debt–none.
While hospitals worldwide seem their oyster, ABMD currently focuses their expanding efforts in three markets; the U.S., Germany, and Japan. “Everywhere else,” says CEO Michael Monogue, “we’re planting seeds.” How’s this for planting seeds? ABMD just received approval to begin operations in India. That counts as a seed, right?
What else sets ABMD apart from other stellar winners? Abiomed’s profitable. Wait, did we hear that right–profitable? Yes yes–that’s right. Abiomed is profitable now, and again, no debt.
From the conference call it becomes clear. This medical device maker puts training, education, and outreach in front. For fiscal year 2019(current for ABMD) the management team feels they have a jump on training. Management made a big deal of this fact, helping impress the real company growth strategy.
Metrics to watch for ABMD. Total doctors trained, total hospitals, and devices per location. One Impella model now in Japan is optical, allowing cloud data access.
For the yet unconvinced, we have the kicker. FAAG draws smart investors on fabulous growth and industry positioning. FAAG has also been nose-bleed expensive. And ABMD? ABMD sells for a peg of 1.98. Translation? Cheap–dirt cheap on earnings growth. NFLX isn’t cheap on earnings, because it doesn’t create a lot of earnings, only debt and vast potential. NFLX peg. 2.68. AMZN peg. 4.39. FB peg. 1.11–cheap, and a dump truck of trouble no investor needs.
“We’re fully established in over 200 hospitals.” Monogue explains strategy on the Q1 conference call. Volume is driving growth, and growth is about outreach, to doctors and hospitals. Establishing “best practices” and proper protocol is the focus of our training efforts. Monogue clearly understands the company must create their own place in the wider market by expanding awareness within the community responsible for using their products. Establishing “best practices” demonstrates the Impella heart pump’s potential.
The company’s expanding efforts focus on training and the raising of awareness. Protocols for proper use and the institutionalizing of “best practices” is how ABMD sees growth. It’s working. Q1 sales up 36%. And EPS? $1.95 vs. $0.81 consensus estimate, a 138.8% EPS beat.
Abiomed’s future looks incredibly bright. One year forecast EPS growth 89%, and 3-5 year rate of 47%. How can that be bad?
Goodness and Horror
ALL FROM THE SAME STOCK AND CHART. THAT’S VALUE.
As secular growth investors, we naturally love Amazon–and we should. AMZN is however later in it’s growth cycle, a time where share price appreciation may not be as fast as in earlier days. AMZN is facing the law of large numbers. That is precisely why STOCKjAW has been hunting for companies in early days. ABMD fits, along with TELEDOC. But Abiomed’s already profitable, unlike TDOC.
TOSS IN A DEATH CROSS AND YOU’RE DONE. STOCKS DO BOUNCE, EVENTUALLY–USUALLY.
Abiomed’s Q1, 2019 results brought analysts to their feet. “Congrats on a great quarter” was the repeated refrain during the call. Some “congrats” are perfunctory, while others are heart-felt. Impressed analysts don’t hide their admiration or skepticism. Having covered the facts, we certainly understand why.
All medical device makers, such as ABMD, are subject to governmental approvals and pricing shifts. The CMS, Centers for Medicare/Medicaid Services currently controls a significant amount of Abiomed’s future. A CMS ruling on 7-26-18, the day the company reported, provided strength to the company’s story.
The news was all good. Most importantly, CMS dumped it’s once-planned intent to cut a key reimbursement rate by 24%. The ruling also added coverage for the additional use of the Ipella heart pump. Rulings such as this are detailed. Find such below.
AMZN 55%ytd, 84% 1 year. Peg 4.39
NFLX 78%ytd, 90% 1 year. Peg 2.63
ABMD 101%ytd, 149% 1 year. Peg 1.98
The “smart money” has turned away from Netflix now, based almost solely on valuation. Facebook has fallen from grace on regulation fears, execution concern, and the company’s announcement about their future systemic profitability decline; climbing cap-ex and security spending growth set to overtake EPS growth rate. Meanwhile Amazon and Alphabet shine, the former quite expensively. Is AMZN worth the premium, vs. ABMD?
Year-to-date Abiomed has outperformed Amazon by a factor of 2; 101% ytd for ABMD, and 55% ytd AMZN. ABMD did so while costing less then half of AMZN’s eardrum-flexing 4.39 price-to-earnings growth rate. Does that make this secular growth phenom a value? Ah, yes, and no doubt.
STOCKjAW IR site and conference call STAR RATING–4 STARS(4/4)
ABMD states everything clearly, and concisely. Their presentation is easy to follow, non-promotional, and contains no jargon, or acronyms. The bullet-point press releases are perfect preparations for their calls.