Avinger Inc (NASDAQ:AVGR), a US$10.43m small-cap, is a healthcare company operating in an industry, which has experienced tailwinds from issues such as higher demand driven by an aging population and the increasing prevalence of diseases and comorbidities. Moreover, healthcare equipment providers are faced with particularly difficult and interdependent challenges. Therefore, care delivery approaches that are holistic and technology-enabled are more likely to result in positive outcomes in the long run. Healthcare analysts are forecasting for the entire industry, a positive double-digit growth of 19.16% in the upcoming year , and a whopping growth of 47.39% over the next couple of years. This rate is larger than the growth rate of the US stock market as a whole. An interesting question to explore is whether we can we benefit from entering into the healthcare sector right now. Below, I will examine the sector growth prospects, and also determine whether Avinger is a laggard or leader relative to its healthcare sector peers.
What’s the catalyst for Avinger’s sector growth?
Integration with technology for more personalized and data-driven equipment, underpinning healthcare ‘internet of things’ has been a structural shift for the healthcare equipment providers. In the past year, the industry delivered growth of 8.11%, though still underperforming the wider US stock market. Avinger leads the pack with its impressive earnings growth of 10.85% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with Avinger poised to deliver a 43.06% growth over the next couple of years compared to the industry’s 19.16%. This growth is a median of profitable companies of 25 Medical Equipment companies in US including Surmodics, Lantheus Holdings and Cutera. This growth may make Avinger a more expensive stock relative to its peers.
Is Avinger and the sector relatively cheap?
Healthcare companies are typically trading at a PE of 39.05x, higher than the rest of the US stock market PE of 18.09x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a similar 11.96% on equities compared to the market’s 11.18%. Since Avinger’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Avinger’s value is to assume the stock should be relatively in-line with its industry.
Avinger’s industry-beating future is a positive for investors. If Avinger has been on your watchlist for a while, now may be the time to enter into the stock, if you like its growth prospects and are not highly concentrated in the healthcare equipment industry. However, before you make a decision on the stock, I suggest you look at Avinger’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has AVGR’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Avinger? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.