Medical device-maker Senseonics (NYSE:SENS) has had an incredible run at the stock market this year. SENS stock has benefited from several catalysts, including the interest of the Reddit community.
As a result, the stock is up a massive 330% this year.
Moreover, its revenue growth has been impressive, and the company has been making major strides in improving its continuous glucose monitoring system (CGM). The stock has gotten way ahead of itself, though, which is why it’s best to wait for a pull-back before investing in it.
SENS stock had leaped up more than 500% by mid-February. It shed some of those gains, but the pull-back wasn’t enough to bring its price metrics back down to Earth.
SENS currently trades at nearly 129 times forward sales. Additionally, it is overvalued by over 14%, according to analyst estimates. At this point, a major pullback is warranted before SENS stock can become attractive to investors.
Before investing in any company, it is imperative to assess the broader industry tailwinds. A company with strong tailwinds pushing it is likely to enjoy healthy profits.
Obesity is linked to diabetes, which has become increasingly prevalent in the United States. The trend is likely to continue at an aggressive pace. Hence, there will be more demand for effective management and diagnostics for diabetes. Its prevalence rose from 211.2 million in 1990 to 476 million in 2017.
In catering to the growing need for diabetic patients, Senseonics has developed a real-time CGM called Eversense. It is a first-generation sensor, the only CGM that lasts for months.
It is the first and only removable device, an adhesive patch that the company claims are more gentle on the skin and also more convenient than prevailing solutions. Since it isn’t made of metal, it is also convenient for a patient who needs to have an MRI scan taken.
Additionally, it also has a sensor that on-body alerts if a patient’s glucose reaches dangerous levels. All in all, it’s a convenient tool, which can play a critical role in diabetes management for years to come.
Regulatory Wins and the Future
Senseonics has successfully cleared all the regulatory hurdles with Eversense and is now looking to ramp up sales. The CGM market, though, is highly competitive.
There are established players such as DexCom (NASDAQ:DXCM), who have technologies that physicians are comfortable using and prescribing. Nevertheless, Eversense can make waves in the industry due to its differentiating characteristics and other key developments.
The company has recently partnered up with diabetes care company Ascensia, which took over the launch of Eversense in the USA earlier this year and is managing affairs in certain European markets for Senseonics. Ascensia has begun direct-to-consumer campaigns to ramp up sales of Eversense.
With its expertise in diabetes care, Ascencia can provide the much-needed edge that Senseonics needs in getting ahead of its competition.
In its most recent quarter, total revenues for the company climbed over 12 times to $3.3 million from the prior year period. Moreover, it has reiterated its guidance of $12 million to $15 million for the year. The Ascencia partnership will help Senseonics in boosting its sales in the coming quarters.
Final Word on SENS Stock
Diabetes is on the rise globally, which is why there is an increasing demand for robust CGM technology. Senseonics has done incredibly well to put forward a differentiated product that effectively caters to the needs of diabetic patients.
The company is operating under the sector tailwind, which favors significant growth. There is considerable competition in this niche, though, which is why Senseonics is unlikely to generate blockbuster results in the near term.
However, it does have a strong long-term case which makes it an interesting bet on the pull-back.
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On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.