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Here's Why You Should Hold Merit Medical (MMSI) Stock Now

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With a market capitalization of approximately $2.54 billion, Merit Medical Systems, Inc.’s (MMSI - Free Report) acquisition-driven strategy is expected to boost growth through the expansion of product offerings in all business segments. Favorable prospects in the HeRO product line also bodes well.

However, higher consolidation in the healthcare industry exerts pressure on the prices of Merit Medical’s products. Cutthroat competition and lack of direct sales in many countries are other headwinds. Based on these mixed trends, the stock has a Zacks Rank #3 (Hold).

For fiscal 2018, the Zacks Consensus Estimate for revenues is currently pegged at $848.4 million, reflecting an increase of 16.6% year over year. Notably, the Zacks Consensus Estimate for earnings is currently pegged at $1.65 per share, showing an increase of 28.9% year over year.

Here we take a quick look at the major factors that have been plaguing Merit Medical and discuss the prospects that ensure near-term recovery.

Merit Medical Systems, Inc. Price and Consensus

 

Factors Plaguing Merit Medical

The medical products industry is highly competitive. Merit Medical competes globally in several market areas, including diagnostic and interventional cardiology; interventional radiology; neurointerventional radiology; vascular, general as well asthoracic surgery; electrophysiology; cardiac rhythm management; interventional pulmonology; interventional nephrology; orthopaedic spine surgery and many more.

In the interventional cardiology, radiology, gastroenterology, endoscopy, general surgery, thoracic surgery and pulmonology markets, Merit Medical competes with large international, multi-divisional medical supply companies such as Cardinal Health, Boston Scientific Corporation, Medtronic, Abbott, Teleflex, Becton, Dickinson and Company, Stryker Corporation and Terumo Corporation.

Also, the company faces aggressive competition from medium-size companies like B. Braun, Uresil, BTG, Olympus Medical, Edwards Lifesciences, Argon, CONMED, AngioDynamics, Medcomp and U.S. Endoscopy.

Why Should You Still Hold?

Merit Medical’s HeRO (Hemodialysis Reliable Outflow) product line has been a key contributor to growth. HeRO Graft, Super HeRO Adapter and HeRO Ally Revision Kit are the three platforms comprising theHeRO family of dialysis devices. Considering the solid global prospects of hemodialysis solutions, the product line is likely to provide Merit Medical with a competitive edge in the MedTech markets.

Notably, the HeRo product line was acquired by Merit Medical from CryoLifein 2017. Per management, the ‘Think HeRO Graft Training program’ in the platform is likely to provide substantial scope over the long run.

Of all the three HeRO lines, HeRO Graft is the most important owing to  strong cost-saving efficiencies. HeRO Graft is a fully subcutaneous vascular access system, intended for use in maintaining long-term vascular access for chronic hemodialysis patients who have failing fistulas, grafts or are catheter dependent due to a central venous blockage. Per management, HeRO Graft enables cost savings of more than $3,100 (per patient/year) to the dialysis center when converting catheter-dependent patients to the HeRO Graft.

Favorable Price Performance

Merit Medical outperformed its industry in a year's time. The company’s shares have returned almost 34.8% compared with the industry's rise of 7.6%. The current level is also higher than the S&P 500 index’s return of 13.3%.

Key Picks

A few better-ranked stocks in the broader medical space are Genomic Health , Abiomed and Stryker Corp (SYK - Free Report) .

Genomic Health has an expected earnings growth rate of 187.5% for the current quarter. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Abiomed has a projected long-term earnings growth rate of 27%. The stock flaunts a Zacks Rank #1.

Stryker has a projected long-term earnings growth rate of 9.7%. The stock carries a Zacks Rank #2 (Buy).

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