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Here's Why You Should Retain Masimo (MASI) Stock For Now

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Masimo Corporation (MASI - Free Report) has been gaining on the back of its slew of product launches over the past few months. A robust second-quarter 2021 performance, along with a few regulatory approvals, is expected to contribute further. Overdependence on Masimo SET and reimbursement headwinds persist.

Over the past year, this Zacks Rank #3 (Hold) stock has gained 29.1% compared with 14.9% growth of the industry and 31.6% rise of the S&P 500.

The renowned global provider of non-invasive monitoring systems has a market capitalization of $15.55 billion. The company projects 16.4% growth for 2022 and expects to maintain its strong performance. Masimo has delivered an earnings surprise of 15.27% for the past four quarters, on average.

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Let’s delve deeper:

Strong Q2 Results: Masimo’s solid second-quarter 2021 results buoy our optimism. The company recorded a strong rebound in sensor sales (on the back of steady expansion of monitoring in hospitals), along with robust order shipments, which is encouraging. Expansion of the company’s installed base is also impressive. A slew of favorable studies on Masimo’s launches over the past few months is also impressive. Expansion of adjusted operating margin bodes well for the stock. A raised financial outlook for 2021 augurs well.

Regulatory Approvals: We are optimistic about Masimo’s impressive progress on the regulatory front, with respect to its products. The company, in June 2021, announced receipt of the FDA 510(k) clearance for its wearable, wireless thermometer — Radius T° — for both prescription and over-the-counter use on patients and consumers above the age of five.

In April, the company announced receipt of the FDA 510(k) clearance for its Radius PCG, a portable real-time capnograph with wireless Bluetooth connectivity.

Product Launches: We are upbeat about Masimo’s introduction of a slew of products over the past few months. The company, in July 2021, announced the release of its latest and most advanced rainbow SET board, MX-7, which has the ability to support all 13 of Masimo’s SET pulse oximetry and rainbow Pulse CO-Oximetry measurements in an advanced module re-engineered to reduce power needs.

In February, Masimo announced the U.S. introduction of softFlow, an innovative pulmonary care therapy that provides nasal high-flow warmed and humidified respiratory gases to spontaneously breathing patients.

Downsides

Overdependence on Masimo SET: Masimo currently derives the majority of its revenues from its Masimo SET platform, Masimo rainbow SET platform and related products. Thus, the company’s business is highly dependent upon the continued success and market acceptance of its proprietary Masimo SET and Masimo rainbow SET technologies that serve as the basis of its primary product offerings. Continued market acceptance of products incorporating these technologies will depend upon Masimo continuing to provide evidence to the medical community that its products are cost-effective and offer significantly improved performance compared to conventional pulse oximeters.

Reimbursement Headwinds: Sales of Masimo’s products depend, in part, on the reimbursement and coverage policies of governmental and private healthcare payers. The lack of adequate coverage and reimbursement for Masimo’s products or the procedures in which its products are used may deter customers from purchasing the company’s offerings. These trends could lead to pressure to reduce prices for the company’s current and future products, hinder its ability to obtain market adoption, cause a decrease in the size of the market or potentially increase competition, thus inducing material adverse effects on its business.

Estimate Trend

Masimo is witnessing a positive estimate revision trend for 2021. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 0.5% north to $3.85.

The Zacks Consensus Estimate for the company’s third-quarter 2021 revenues is pegged at $295.7 million, suggesting a 6.3% improvement from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks from the broader medical space are Henry Schein, Inc. (HSIC - Free Report) , IDEXX Laboratories, Inc. (IDXX - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .

Henry Schein’s long-term earnings growth rate is estimated at 13.9%. The company presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

IDEXX’s long-term earnings growth rate is estimated at 19.9%. It currently has a Zacks Rank #2.

Intuitive Surgical’s long-term earnings growth rate is estimated at 9.7%. It currently carries a Zacks Rank #2.

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