Senseonics (NYSEAMERICAN:SENS) is a nascent continuous glucose monitoring (CGM) company that is likely to follow a similar trajectory as DexCom (NASDAQ:DXCM). As such, SENS stock is likely to move up quite a bit soon.
DexCom is a much larger company whose stock has risen over 21 times in the past 10 years. It brought to market its CGM products over successive iterations during that period. As a result SENS stock is likely to move up 5 to 10 times in the next five years, assuming it receives Food and Drug Administration (FDA) approval for its CGM devices.
Liquidity Fears Allayed
However, in the past month and a half, SENS stock has dropped like a rock. It fell from a peak of $5.27 on Feb. 16 to around $2.60 today, Apr. 5. That is a heavy 50% tumble that makes it look like there is a problem with the company.
But that is not the case. Recently Senseonics released its earnings on Mar. 4 where it said that the company now has $187.3 million in cash on its balance sheet as of Jan. 31. This is up from $18.2 million at the end of 2020.
Cash went up as a result of equity financings completed during the first quarter of 2021. Here is what President and CEO Tim Goodnow said during the earnings call about the company’s liquidity: “the existing cash and cash equivalent should be sufficient to fund the business through cash flow breakeven from operations and the commercial launch.”
This relates to its 365 days sensor designed to be calibrated only once per week, called the Eversense XL. The company is already “collaborating” with a Swiss company, Ascensia, in marketing its 90 days and 180 days sensor throughout Europe.
Last year Senseonics burnt through about $65.5 million in negative free cash flow, based on its Cash Flow Statement on page 90 of its recent 10-K filing. This implies that with $187 million, Senseonics now has the cash to last at least several years.
In fact, analysts seem to believe that the FDA will review by early fall its most recent product, the Eversense XL. However, its commercialization seems to be already on track in Europe since Senseonics is using Ascensia in Europe to market its products.
What This Means For Senseonics
Therefore, investors can expect to see SENS stock move higher as the company rolls through these sets of catalysts. In addition, doctors are freer to schedule surgical implants of its diabetes monitoring devices. This will allow Senseonics’ revenue to climb out of the hole it is in.
Last year, the company generated just $4.85 million in sales, down from $21.3 million in 2019. But now analysts surveyed by Seeking Alpha expect to see sales to more than double to $12.85 million in 2021. But by 2022 revenue is forecast to go up by over 6 times to $32.90 million.
At a market cap of $974 million SENS stock trades for 30 times forward revenue multiple. But consider this. One of its main competitors, DexCom now has a $35 billion market cap and trades at 15 times 2021 forecast sales of $2.81 billion.
Moreover, as I pointed out above, this stock has risen over 21 times in the past 10 years, including 4.4 times in the last 5 years. DexCom, like Senseonics, also has a cloud-based diabetes monitoring sensor product. This allows the recipient to not have to use lancers to prick their fingers while they monitor their blood sugar levels.
What To Do With SENS Stock
The average analyst either has a hold on the stock, according to TipRanks.com and at Yahoo Finance. Or else they have an average price target of $1.69, according to Marketbeat. However, I suspect these ratings are from before the company’s recent earnings release where they announced their jump in liquidity.
If you look at the pathway that DexCom took over its history in the past 5 to 10 years, you can see that the market will warm up to Senseonics. Look to take advantage of the recent dip in SENS stock with a view toward its potential long-term trajectory.
On the date of publication, Mark R. Hake did not hold a long or short position in any of the securities in this article.
Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.
