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Rockwell Medical Stock Surges 108.5% YTD: Should You Snap it Up Now?
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Rockwell Medical (RMTI - Free Report) delivered an impressive performance through 2024, with its stock witnessing more than 108% year-to-date surge, outperforming the 15.5% rise of the industry and the benchmark’s 18.1% increase.
The company also strongly outperformed its key rivals like EDAP TMS (EDAP - Free Report) and IRIDEX (IRIX - Free Report) year to date. EDAP TMS has fallen 40.3% and IRIDEX has declined 32.3% during this period.
YTD Share Comparison
Image Source: Zacks Investment Research
This year can be regarded as a momentous period for Rockwell Medical’s business because this is the first time in the company’s history that it has achieved a steady revenue growth path, with a projection of more than $100 million in annual sales. Further, in 2024 so far, the company has reported an improving trend of gross profit, improved gross margin (from a negative number to a consistently growing positive number), attained sustained profitability, and, last but not least, significantly lowered its debt burden.
As of the latest trading session, the stock closed at $3.94, a little below its 52-week high of $4.38.
RMTI Stock Above SMAs
RMTI stock is also trading significantly above both its 50-day and 200-day moving averages since Aug. 8, 2024. The stock is also enjoying a golden crossover support as its 50-day moving average has been consistently ahead of the 200-day moving average since June 28. This, while indicating the possibility of a further bullish shift in the stock's price, is generating strong optimism among investors.
RMTI Stock Above 50 & 200-Day SMA & a Golden Crossover
Image Source: Zacks Investment Research
Major Factors Driving RMTI Shares
High Growth Markets: Going by a recent Grand View Research report, the U.S. hemodialysis and peritoneal dialysis market size was valued at $36.21 billion in 2022 and is projected to expand at a CAGR of 6.10% from 2023 to 2030.Last year, following RMTI’s acquisition of the hemodialysis concentrates business from Evoqua, the number 3 player in the hemodialysis market at that time, the market has now consolidated to two primary players who cater to the over 12,000 dialysis clinics in the United States. Considering the rising incidence of Acute Kidney cases and risks associated with transplants, the expansion in the field of hemodialysis concentrates has opened up enormous prospects for the company in this space. With the latest consolidation, Rockwell Medical has now been acknowledged as the only independent supplier of concentrates with the scale and distribution to service these in-center and hospital-based clinics.
Running a Successful Revenue Model: Rockwell Medical has started to accurately price its products in the hemodialysis market. At the beginning of 2024, the company undertook a new program to adjust its product pricing structure to reflect the inherent value its products bring to providers. In the second quarter of 2024, the company generated net sales of $25.8 million, which was largely driven by improved value-based pricing and increasing volumes. Annualizing the second-quarter 2024 net sales would put RMTI north of $100 million in revenues, a goal that the company set out to achieve two years back.
Margin Efficiencies: Gross margin continues to trend upward in 2024 as Rockwell Medical further optimizes its business through improved processes, automated manufacturing and enhanced distribution capabilities through the modernization of the company’s infrastructure and technology solutions. Through the first two quarters of 2024, RMTI achieved consecutive quarters of improved gross profit and gross margin. The company reported 18% gross margin for the second quarter, exceeding the company’s gross margin guidance of 18% for the full year of 2024.
Generating Positive Cash Balance: The combination of increased sales and greater gross margin has led to cash flow from operations of $1.4 million for the second quarter of 2024 and, as a consequence, an increase in RMTI’s cash balance. The company’s cash balance has gone from $8.6 million at the end of the first quarter to $11.9 million at the end of the second quarter. For the first time in recent history, RMTI achieved profitability on a cash flow and adjusted EBITDA basis in the second quarter of 2024. The company considers this a turning point and expects to build upon this momentum in the coming quarters.
Bullish Projections for 2025: For 2025 and beyond, Rockwell Medical is focused on two areas. First, it intends to grow the company’s concentrates business and make it more profitable as the company continues to work toward keeping annual revenues above $100 million and gross margins up to 30%. Second, it intends to expand beyond concentrates.
Upward Estimate Revisions for RMTI
The Zacks Consensus Estimate for RMTI’s 2024 earnings has been revised upward over the past 60 days. It has been narrowed to a loss of 3 cents from a loss of 14 cents over this period.
Image Source: Zacks Investment Research
RMTI Trading Cheap
This is evident from the price/sales ratio. RMTI shares currently trade at 1.17X forward earnings, well off its five-year high of 2.73X but ahead of its median of 0.56X. The stock is also trading significantly below the industry’s price/sales ratio of 5.80.
Image Source: Zacks Investment Research
Final Take on RMTI
Rockwell Medical continues to outperform its peers in a challenging market for medical devices, banking on its continued efforts to focus on optimizing business to drive sustainable profitability and meaningful cash flow generation. The company is working on enhancing cash balance through the profits generated in the business and is beginning to reinvest those profits back into the business. RMTI also continues to reduce the cost of manufacturing products by adding new equipment and enhancing its infrastructure to fully automate its processes.
While other industry peers face uncertainty due to supply issues and other macroeconomic headwinds, the company’s growth strategies position it for continued success over the upcoming period. Although the high-interest rate environment remains a concern for investors, upward revisions in earnings estimates reinforce RMTI’s Zacks Rank #1 (Strong Buy). This makes RMTI worthy of addition to investors' portfolios at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
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Rockwell Medical Stock Surges 108.5% YTD: Should You Snap it Up Now?
Rockwell Medical (RMTI - Free Report) delivered an impressive performance through 2024, with its stock witnessing more than 108% year-to-date surge, outperforming the 15.5% rise of the industry and the benchmark’s 18.1% increase.
The company also strongly outperformed its key rivals like EDAP TMS (EDAP - Free Report) and IRIDEX (IRIX - Free Report) year to date. EDAP TMS has fallen 40.3% and IRIDEX has declined 32.3% during this period.
YTD Share Comparison
Image Source: Zacks Investment Research
This year can be regarded as a momentous period for Rockwell Medical’s business because this is the first time in the company’s history that it has achieved a steady revenue growth path, with a projection of more than $100 million in annual sales. Further, in 2024 so far, the company has reported an improving trend of gross profit, improved gross margin (from a negative number to a consistently growing positive number), attained sustained profitability, and, last but not least, significantly lowered its debt burden.
As of the latest trading session, the stock closed at $3.94, a little below its 52-week high of $4.38.
RMTI Stock Above SMAs
RMTI stock is also trading significantly above both its 50-day and 200-day moving averages since Aug. 8, 2024. The stock is also enjoying a golden crossover support as its 50-day moving average has been consistently ahead of the 200-day moving average since June 28. This, while indicating the possibility of a further bullish shift in the stock's price, is generating strong optimism among investors.
RMTI Stock Above 50 & 200-Day SMA & a Golden Crossover
Image Source: Zacks Investment Research
Major Factors Driving RMTI Shares
High Growth Markets: Going by a recent Grand View Research report, the U.S. hemodialysis and peritoneal dialysis market size was valued at $36.21 billion in 2022 and is projected to expand at a CAGR of 6.10% from 2023 to 2030.Last year, following RMTI’s acquisition of the hemodialysis concentrates business from Evoqua, the number 3 player in the hemodialysis market at that time, the market has now consolidated to two primary players who cater to the over 12,000 dialysis clinics in the United States. Considering the rising incidence of Acute Kidney cases and risks associated with transplants, the expansion in the field of hemodialysis concentrates has opened up enormous prospects for the company in this space. With the latest consolidation, Rockwell Medical has now been acknowledged as the only independent supplier of concentrates with the scale and distribution to service these in-center and hospital-based clinics.
Running a Successful Revenue Model: Rockwell Medical has started to accurately price its products in the hemodialysis market. At the beginning of 2024, the company undertook a new program to adjust its product pricing structure to reflect the inherent value its products bring to providers. In the second quarter of 2024, the company generated net sales of $25.8 million, which was largely driven by improved value-based pricing and increasing volumes. Annualizing the second-quarter 2024 net sales would put RMTI north of $100 million in revenues, a goal that the company set out to achieve two years back.
Margin Efficiencies: Gross margin continues to trend upward in 2024 as Rockwell Medical further optimizes its business through improved processes, automated manufacturing and enhanced distribution capabilities through the modernization of the company’s infrastructure and technology solutions. Through the first two quarters of 2024, RMTI achieved consecutive quarters of improved gross profit and gross margin. The company reported 18% gross margin for the second quarter, exceeding the company’s gross margin guidance of 18% for the full year of 2024.
Generating Positive Cash Balance: The combination of increased sales and greater gross margin has led to cash flow from operations of $1.4 million for the second quarter of 2024 and, as a consequence, an increase in RMTI’s cash balance. The company’s cash balance has gone from $8.6 million at the end of the first quarter to $11.9 million at the end of the second quarter. For the first time in recent history, RMTI achieved profitability on a cash flow and adjusted EBITDA basis in the second quarter of 2024. The company considers this a turning point and expects to build upon this momentum in the coming quarters.
Bullish Projections for 2025: For 2025 and beyond, Rockwell Medical is focused on two areas. First, it intends to grow the company’s concentrates business and make it more profitable as the company continues to work toward keeping annual revenues above $100 million and gross margins up to 30%. Second, it intends to expand beyond concentrates.
Upward Estimate Revisions for RMTI
The Zacks Consensus Estimate for RMTI’s 2024 earnings has been revised upward over the past 60 days. It has been narrowed to a loss of 3 cents from a loss of 14 cents over this period.
Image Source: Zacks Investment Research
RMTI Trading Cheap
This is evident from the price/sales ratio. RMTI shares currently trade at 1.17X forward earnings, well off its five-year high of 2.73X but ahead of its median of 0.56X. The stock is also trading significantly below the industry’s price/sales ratio of 5.80.
Image Source: Zacks Investment Research
Final Take on RMTI
Rockwell Medical continues to outperform its peers in a challenging market for medical devices, banking on its continued efforts to focus on optimizing business to drive sustainable profitability and meaningful cash flow generation. The company is working on enhancing cash balance through the profits generated in the business and is beginning to reinvest those profits back into the business. RMTI also continues to reduce the cost of manufacturing products by adding new equipment and enhancing its infrastructure to fully automate its processes.
While other industry peers face uncertainty due to supply issues and other macroeconomic headwinds, the company’s growth strategies position it for continued success over the upcoming period. Although the high-interest rate environment remains a concern for investors, upward revisions in earnings estimates reinforce RMTI’s Zacks Rank #1 (Strong Buy). This makes RMTI worthy of addition to investors' portfolios at present. You can see the complete list of today’s Zacks #1 Rank stocks here.