Regenerative medical technology company Xtant Medical Holdings, Inc. (XTNT) witnessed substantial price gains over the past year owing to the heightened focus on the global healthcare industry. XTNT has gained 169.2% over the past year, and 344% over the past six months.
The company’s fourth quarter results and a $20 million private placement to an institutional investor last week drove the stock to record highs. XTNT has more than doubled over the last five trading days to close yesterday’s trading session at $3.85.
However, XTNT’s revenues declined 17.4% year-over-year to $14 million in the fourth quarter, ending December 31, 2020. Also, the company reported a net loss of $0.70 million over this period. Its declining financials are expected to put pressure on the stock’s current price.
Here’s what I think can influence XTNT’s performance in the near term:
Frail Financials
XTNT’s revenues have declined at a CAGR of 13.6% over the past three years, while its total assets fell at a rate of 26.8% over this period. The company’s annual revenue and gross profit declined in 2020, while its net income and EPS values have remained negative.
The company generated $23.34 million in revenues over the past year, and gross profits of $34.39 million. Its 64.48% trailing 12-month gross profit margin is 15.2% higher than the industry average 55.99%. However, the company’s trailing 12-month net income margin, ROTC and ROA are negative.
Also, XTNT has been losing cash in its operations, as indicated by its negative trailing 12-month cash flow from operations of $731,000.
Premium Valuation
In terms of trailing 12-month ev/ebitda, XTNT is currently trading at 294.91x, which is significantly higher than the industry average 20.40x. The company’s trailing 12-month price/book ratio of 21 is 338.4% higher than the industry average 4.79.
However, XTNT’s trailing 12-month ev/sales and price/sales multiples of 7.34 and 2.19, respectively, are slightly lower than industry averages.
Analyst Estimates Indicate Slight Recovery Potential
While XTNT’s financials are far from impressive, analysts expect the company to improve slightly in fiscal 2021. Its EPS is expected to rise at a rate of 20% per annum over the next five years. XTNT has an impressive earnings surprise history also: it beat the Street’s EPS estimates in three out of the trailing four quarters. The consensus revenue estimate of $65.88 million for fiscal 2021 indicates a 23.5% improvement year-over-year.
Price Target Indicates Potential Downside
XTNT is currently trading 45.5% below its 52-week high of $6.58, which it hit on February 26. Analysts expect the stock to hit $1 soon, indicating a potential downside of 74%.
POWR Ratings Reflect Uncertainty
XTNT has an overall rating of C, which equates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a C grade for Value, Quality, Sentiment, Stability and Momentum. This is justified, given the stock’s slightly higher valuation compared to the industry average. In terms of price performance, XTNT has delivered impressive gains over the past year. However, the stock has declined 39.9% over the past three years, and 89.1% over the past five years. This unstable growth momentum is reflected in the stock’s Momentum grade .
XTNT is ranked #89 of 183 stocks in the C-rated Medical – Devices & Equipment industry. In addition to the grades I’ve highlighted, you can check out additional POWR Ratings for Growth here.
There are 59 stocks in the Medical – Devices & Equipment industry with an overall rating of A or B. Click here to see them.
Bottom Line
The medical devices industry is set to grow in 2021 and beyond given the degree of technological advancement and innovations in this field. With new products and devices launched periodically, XTNT should benefit from industry tailwinds. However, the company’s bleak financials and profitability raise concerns regarding the sustainability of its price gains. As analysts expect the stock’s key financial metrics to improve slightly this year, we think it advisable to wait for the company to gain adequate financial strength before investing in its stock.
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XTNT shares were trading at $4.25 per share on Wednesday morning, up $0.40 (+10.39%). Year-to-date, XTNT has gained 255.32%, versus a 2.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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