After happily bidding up the stock price to an impressive premium valuation, investors have been more cautious with cardiac device developer iRhythm Technologies (NASDAQ: IRTC) in the last year. There's not too much to complain about with the growth stock. The company's shares have soared roughly 200% in the last three years. In the second quarter of 2019, revenue grew 50% from the year-ago period. The business even recently inked a partnership with Alphabet's Verily subsidiary to track "silent" irregular heartbeats that can have potentially fatal health consequences.
Despite the progress and sales growth, investors have apparently decided to let the business earn its premium valuation rather than continuing to push it higher. Shares of iRhythm Technologies have lost 15% in the last year. But the company is still valued at $2 billion, and the stock trades at 11 times sales and 40 times book value.
One likely point of contention is that iRhythm Technologies hasn't benefited much from its first-half 2019 gross margin of 75.5%. The business has increased operating expenses in lockstep with gross profits, resulting in almost no progress erasing operating losses. Can management prioritize both growth and profits to please investors?