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InMode: Stock’s Beauty More Than Skin Deep
Stock Analysis & Ideas

InMode: Stock’s Beauty More Than Skin Deep

InMode Ltd. (INMD) is a leading provider of innovative, energy-based, minimally-invasive surgical medical treatment solutions internationally. Within the esthetics market, InMode’s products and solutions are mainly designed to handle three energy-based treatment types, comprised of: (i) face and body contouring; (ii) medical esthetics; and (iii) women’s health.

The company’s products have repeatedly been at the forefront of technological development in the esthetic solutions market, and along with growing market demand, InMode’s financials have snowballed over the past few years.

Growing Revenues and Profits

InMode top and bottom lines have consistently been hitting new all-time highs, following multiple product launches by the company and ever-growing market demand. Early in Q3, the company delivered two new platforms to the market: EmpowerRF and EvolveX.

InMode’s revenue for the period grew 58% year-over-year to $94.2 million, while net income reached $44.7 million, up 87% against Q3-2020, illustrating solid costs management. Patients looking for minimally invasive treatments at unparalleled levels allowed InMode to preserve the number of disposables sold in the previous quarter, despite seasonal instabilities traditionally associated with Q3s.

The company also saw its already juicy gross margins grow slightly further, by 10 basis points to 86%. As you can tell from this number, the company is highly profitable. Net income margins jumped to 47.48% during the quarter, from 40.02% in the prior-year period. This percentage is utterly outstanding. An extremely low number of companies can sustainably post such high net income margins, and InMode is one of them.

The company also ended the quarter with a total cash position of $387.4 million, which is quite great since it also features $0 of long-term debt on the balance sheet. Hence, it wouldn’t be unlikely for investors to potentially see a dividend or strong stock repurchases, as cash accumulates over time.

Is INMD Stock Expensive?

InMode’s consistently impressive growth has resulted in its shares undergoing a fantastic rally since its IPO. However, it appears that the stock had become quite overvalued around October’s highs, and it has since corrected substantially.

Based on the company’s performance over the first nine months of the year and its ongoing trajectory entering Q4, I project that InMode will deliver EPS of around $1.95 for FY-2021. At the stock’s current price levels, this implies a P/E 30.1. Following the stock’s 40% decline from its previous highs, it appears to me that InMode is now somewhat fairly valued considering its ongoing growth levels.

Wall Street’s Take

Turning to Wall Street, InMode has a Strong Buy consensus rating based on five Buys assigned in the past three months. At $94.40, INMD’s price target implies 74.4% upside potential over the next 12 months.

Conclusion and Risk

In my view, InMode is operating in a very favorable market environment, with demand in the aesthetics industry growing dramatically. Following the stock’s steep decline, it appears to me that shares are relatively attractively priced considering the company’s ongoing net income growth trajectory. For this reason, I am bullish on the stock.

That said, investors should be wary of a particular risk, and that is the company’s exposure in China, where the company experiences approval delays of its non-invasive product. Hence, future growth estimates could be over-optimistic if delays persist through the year.

Disclosure: At the time of publication, Nikolaos Sismanis did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates  Read full disclaimer >

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