Post-IPO Review: InMode Expects 2020 Revenue To Exceed 2019
InMode (INMD) went public in August , 2019, selling five million shares at $14.00 to collect $70 million in gross proceeds.
The firm has been commercializing its adipose fat tissue remodeling technologies.
INMD has managed its business for long-term success through the Covid-19 pandemic and is positioned to meet or slightly exceed the revenue results for 2019.
Founded in 2008 to provide minimally invasive face and body contouring, medical aesthetics and health products and solutions for women, Yokneam, Israel-based InMode is.
Management is headed by Moshe Mizrahy, the co-founder and CEO, who previously co-founded Syneron Medical and served as CEO.
InMode has "developed and commercialized products using medically accepted radio frequency [RF] energy technology that can penetrate deep into subdermal fat, enabling remodeling of the adipose tissue," including Radio Frequency Assisted Lipolysis [RFAL], Deep Subdermal Fractional RF, Simultaneous Fat Destruction and Skin Tightening, and Deep Heating Collagen Remodeling.
Below is a brief video about the company and its solutions:
InMode 's offerings allow physicians to perform various skin procedures, including simultaneous fat killing and skin tightening, permanent hair reduction through the use of our innovative dual-wavelength technology, and other skin appearance and texture targeting treatments through the use of our high-power, intense pulsed light [IPL] technology.
In addition , management expects to begin providing CelluTite, a cellulite appearance treatment, Evolve, a body skin tightening product, and Evoke, a skin tightening solution for the face and neck.
The firm markets its products to plastic and facial surgeons, aesthetic surgeons, dermatologists, and gynecologists / obstetricians.
The global market for medical aesthetics was valued at $10.3 billion in 2018 and is projected to reach $18.9 billion by 2024 , growing at a CAGR of 10.6 per cent between 2018 and 2024, according to a 2018 market research report by Markets and Markets.
The main factors driving forecasted market growth are increased awareness and adoption of minimally invasive and non-invasive esthetic procedures, increased accessibility among geriatric individuals, increased demand for male esthetic treatments, and increased public awareness of the availability of technologically advanced & user-friendly products.
In 2018 the market for medical aesthetics in the Asia-Pacific region was projected to record the highest CAGR of 13.0 percent during the forecast period.
Major competitors supplying or developing products for medical aesthetics include:
- Allergan (AGN)
- Alma Lasers
- Anika Therapeutics (ANIK)
- Cutera (CUTR)
- Cynosure (HOLX)
- El. En. (BIT: ELN)
- Nestle (OTCPK: NSRGY)
- Johnson & Jonson (JNJ)
INMD 's quarterly topline revenue indicated growth in the 2019 calendar year, before the 2020 Covid-19 pandemic hit:
Similarly, gross profit per quarter also grew and has since decreased in 2020:
Per quarter operating income showed a similar trajectory:
Earnings per share (Diluted) were fairly strong until 2020 and the onset of the Covid-19 pandemic:
Source for chart data: Seeking Alpha
In the past 12 months, INMD 's stock price has risen 60.8 percent vs. the U.S. Medical Equipment index 'rise of 17.2 percent and the overall U.S. market 's growth of 18.7 percent, as the chart below indicates:
Source: Simply Wall Street
Below is a table of the company's relevant capitalisation and valuation figures:
Source: Company Financials
Below is a DCF (Discounted Cash Flow) estimate of the company's projected growth and earnings:
Assuming the above generous DCF parameters, the firm 's shares would be valued at approximately $18.30 versus the current price of $32.23, indicating they are potentially currently overvalued, with the given earnings, growth and discount rate assumptions of the DCF.
Another fair value calculation run by Simply Wall St. shows a higher fair value, at $28.16, which is still lower than the current share price:
As a third valuation check, the NYU Stern Enterprise Value / Revenue multiple indicated a 5.94x multiple for a basket of publicly held healthcare products firms in January 2020. The current EV / Revenue ratio for INMD is 5.78x, so from that perspective it appears fully valued.
In its most recent earnings call, for Q2 2020 results, management highlighted that its ‘business felt the full impact of the global shutdown caused by Covid-19 in March, April, and May of this year as elective surgical procedures altered worldwide.’
The company's customers closed their clinics and INMD 's ability to 'capture new business was at a standstill at the beginning of Q2 2020.'
Management, however, continued to push its R&D, manufacturing, regulatory, and marketing initiatives forward as it anticipated a return to normal activity in the near future.
Notably, by the end of Q2, the firm recovered ‘with sales close to pre Covid-19 levels.’
As to its financial results, revenue in the U.S. declined by 21% but international revenue grew 10% year-over-year.
Compared to 2019, operating expenses slightly decreased as the firm decided to retain its personnel, including its sales team.
The firm finished the second quarter with ample cash and equivalents of $203.4 million and that includes accounting for increasing its inventory to ensure uninterrupted delivery times in future periods.
It appears management has weathered the worst of the Covid-19 pandemic with an eye to long-term success in operating the firm.
While no one likes to see a sharp drop in sales and profits, and the stock has certainly suffered as a result, I'm impressed with management's approach and their forward guidance of the $156 million to $160 million income range for 2020, or slightly more than the results for 2019.
The different valuation estimates above indicate either that the stock is fully valued or overstated. But that is based on trailing the results for twelve months, which I don't think will be the case in the future.
I’m optimistic for InMode’s future prospects and Bullish on the stock over the medium term.
(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. IPO stocks can be very volatile in the days immediately after an IPO. Information provided is for educational purposes only, may be in error, incomplete or out of date, and does not constitute financial, legal, or investment advice.)
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