SMTI - Sizing Up Sanara MedTech

2023-12-12 14:39:23 ET

Summary

• Today, we look at Sanara MedTech Inc., a small medical technology company focused on developing transformative technologies in the healthcare industry.
• The company is delivering impressive revenue growth, is marching towards profitability and the shares have moved up 40% in seven weeks.
• Can the rebound continue? An analysis of Sanara MedTech Inc. follows below.

The truth is not always beautiful, nor beautiful words the truth .”? Lao Tzu, Tao Te Ching.

Today, we shine the spotlight on a small medical device concern called Sanara MedTech Inc. ( SMTI ) . The shares have staged a huge rebound since the end of October. The stock does not have much of an institutional following despite a decent sized market cap. Revenue growth is impressive, and the company seems heading towards profitability in FY2024. An initial analysis follows below.

Company Overview:

Sanara MedTech is headquartered in Fort Worth, Texas. This small medical technology company is focused on developing and commercializing transformative technologies to improve clinical outcomes and reduce healthcare expenditures in the surgical, chronic wound and skincare markets. The company's products are sold in over 30 states and 1,000 facilities now. The stock currently trades near $37.00 a share and sports an approximate market capitalization of $300 million.

The company offers a variety of products for surgical and wound care products led by CellerateRx. This is a hydrolyzed collagen that is applied to a surgical wound and aids in the natural wound healing process. The company also recently launched BIASURGE. This is a no-rinse irrigation solution that contains an antimicrobial preservative effective against a broad spectrum of pathogenic microorganisms. BIASURGE receive FDA clearance in April of this year. ALLOCYTE Plus, a human cells, tissues, and cellular and tissue-based products equivalent also launched this summer.

In August of this year, the company completed a small acquisition that gave Sansar control of the manufacturing process for both CellerateRx and HYCOL. This is expected to reduce costs and eliminate the small percent of royalties Sanara was paying on both of these products.

Third Quarter Results:

The company posted its Q3 numbers on November 13th. Sanara MedTech delivered a GAAP loss per share of 13 cents. Revenues did rise nearly 23% on a year-over-year basis to $16 million. However, that was nearly $3 million light of expectations. Sanara had a net loss of $1.1 million, a slight improvement from its net loss of $1.5 million in the same period a year ago.

Sanara's products were contracted or approved to be sold in more than 3,000 hospitals/ambulatory surgery centers at the end of the third quarter. For the first nine months of this year, Sanara saw overall sales of $47.3 million, representing a 55% increase from the same period a year ago.

Analyst Commentary & Balance Sheet:

I can find only one analyst firm that provides coverage on Sanara MedTech, and that is Cantor Fitzgerald, who reiterated its Buy rating and $49 price target on the stock three days after third quarter results were disclosed.

Just over three percent of the outstanding float in the shares are currently held short. There has been no insider activity in this equity in just over a year now. Sanara MedTech ended the third quarter with just over $6 million in cash and marketable securities against just over $9 million in net long-term debt according to the 10-Q filed for the quarter.

Verdict:

Sanara MedTech had a loss of 87 cents a share in FY2022 on nearly $46 million worth of revenue. The one analyst firm that has projections for Sanara MedTech sees losses falling to 64 cents a share in FY2023 on just under $64 million worth of sales. They see the company having a profit in FY2024 of 52 cents a share as revenues rise to just north of $85 million.

The company is delivering solid revenue growth and looks like it is moving quickly towards profitability. The challenges with recommending SMTI for investment include it has little coverage on Wall Street so there really isn't a " consensus" estimate for earnings and sales growth other than Cantor's. In addition, the company does not even have an investor presentation I can find, nor does management provide a sales breakdown by product. More importantly, the stock has risen by 40% since the end of October and now fetches 70 times Cantor's estimate of FY2024 earnings.

Therefore, I have no recommendation around Sanara MedTech Inc. other than to say it is a growth story worth watching. After the company posts a couple of more quarters of results (and hopefully gets additional analyst coverage and provides more granular detail on its business), we will circle back on this small cap name.

Remember that the most beautiful things in the world are the most useless. ”? John Ruskin.

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