When investors think about buying stocks in the health care sector, they usually gravitate to companies in the big pharma or biotechnology segments. However, the medical device sector can also provide investors some great opportunities, as the segment (represented by the ETF of(IHI – ETF report) has beaten out the broad sector, represented by (XLV – ETF report), over the past year.
These companies are generally not as well-known as the giants of the biotech or pharma world, so it can take some digging to find a few gems. One such company that is definitely worth putting on your radar right now is ABIOMED (ABMD – Analyst Report), a relatively small company in this market that could be poised for some nice gains in the months ahead.
ABMD in Focus
ABIOMED is a Massachusetts-based company that specializes in devices which support proper cardiovascular health. These include catheters as well as an automated monitoring system, helping patients in surgeries and to watch how the recovery process goes afterwards too.
And while shares of this innovative company have been very volatile, they are still sporting nice gains over the past year, including a roughly 40% increase over the past twelve months. While this is obviously a nice move higher, shares are still down on a YTD look and this could actually be a good entry point for the stock. That is of course if you look to recent earnings estimate revisions which suggest that more gains could be ahead for investors before long.
Despite the recent drop in prices, analysts have been moving to increase estimates for ABMD stock as of late. In the past thirty days we haven’t seen a single estimate go lower for either the current year or next year time frames, while the current quarter has seen a 5:1 ratio in terms of increases vs. decreases.
The magnitude of these earnings estimate revisions has also been impressive, as the current quarter has seen the consensus estimate increase by about 5.9% in the past two months. Full year figures have been even better, as the current year consensus has increased by 11.4% in the past sixty days while the following year moved higher by 7.8% in the past two months as well.
Estimates rising that fast might scare off some investors. After all, some might wonder if companies like ABMD can reach and even beat surging expectations. But if we look to ABMD’s recent history, there shouldn’t be much of a concern on this front.
The company has absolutely crushed estimates in each of the last four quarters including an average earnings beat of 89% in the time period in question. The company actually hasn’t missed estimates since late July of 2014, so it definitely knows how to live up to expectations on a regular basis.
No wonder ABMD has earned itself a Zacks Rank #1 (Strong Buy) and why we are looking for more outperformance from this stock in the months ahead too.
The health care market can be a scary place to invest thanks to the extreme volatility. However, medical device makers have shown an ability to outperform, and to be a leader in this corner of the stock world. Plus, the medical instrument sector currently has a rank in the top 25%, so there is definitely plenty of potential behind most companies in this space these days.
Though many companies in this part of the space are relatively unknown, one worth putting on your radar right now is ABMD. Earnings estimates have been soaring for this stock lately, and with a stronger outlook and the recent price action, this could be a perfect time to look closer at the stock as a potential investment in this great industry.
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