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Here's Why You Should Hold on to Tandem Diabetes (TNDM) for Now
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Tandem Diabetes Care, Inc. (TNDM - Free Report) has been gaining from robust international pump shipments. The growing utilization of the company’s Control-IQ technology buoys optimism. Meanwhile, a highly competitive diabetes industry presents tremendous growth opportunities, raising investors’ confidence. A strong solvency position is another notable upside. However, persistent COVID-19 challenges and mounting operating expenses do not bode well for the company.
Over the past year, the Zacks Rank #3 (Hold) stock has gained 26.6% versus an 11.3% decline of the industry and the 17.7% rise of the S&P 500.
The renowned medical device company has a market capitalization of $7.50 billion. The company surpassed earnings estimates in the trailing four quarters, the average surprise being 84.5%.
The company’s earnings are projected to grow 161.3% next year, compared to the industry’s growth projection of 20% and the S&P 500’s estimated 10.9% growth.
Image Source: Zacks Investment Research
Let’s delve deeper.
Factors at Play
Impressive Product Pipeline: Tandem Diabetes, in its earnings call for the third quarter, noted the availability of t:slim X2 technology in more than 20 countries worldwide. The company shipped more than 11,000 pumps outside the United States. During the reported quarter, the company’s Control-IQ technology was utilized by more than two-thirds of the 300,000 customers worldwide. The real-world experiences with Control-IQ technology were also found to be overwhelmingly positive. Further, Tandem Diabetes expects to benefit from new sensor offerings by CGM partners, DexCom and Abbott in 2022.
Diabetes Market Boom: Tandem Diabetes stands to gain from the rapidly growing diabetes industry, which is projected to be driven by factors like an aging population, unhealthy lifestyle, rising awareness and growing healthcare expenditure. Per a report by MarketsandMarkets, the global diabetes care devices market size is expected to reach $4.3 billion by 2025 from $1.7 billion in 2020, at a CAGR of 16.2%. Meanwhile, according to the Centers for Disease Control and Prevention, 34.2 million people of all ages or 10.5% of the U.S. population, had diabetes in 2018. Given the substantial prospects, Tandem Diabetes seems to be leaving no stone unturned to cash in on the bountiful opportunities in the niche market, raising optimism.
Strong Solvency: Tandem Diabetes exited third-quarter 2021 with cash and cash equivalents, and short-term investments of $595 million. The company has not reported any debt on its balance sheet at the end of the reported quarter, indicating strong solvency.
Downsides
Coronavirus Impact: The COVID-19 pandemic is wreaking havoc on the economy as a whole, with Tandem Diabetes facing the impact since its very onset. The company expects the pandemic’s increased variability to have a greater impact on its international markets, with the resurgence of the infection in some areas and strict precautionary measures in others.
Stiff Competition: Tandem Diabetes operates in a highly competitive environment, dominated by firms ranging from large multinational corporations with significant resources to start-ups. Also, the competitive and regulatory conditions in the company's markets limit its ability to switch to strategies like price increases.
Escalating Expenses: In the third quarter, Tandem Diabetes’ selling, general and administrative expenses rose 29.3%, whereas research and development expenses increased 49.8% on a year-over-year basis, respectively. The escalating costs are building pressure on the bottom line.
Estimate Trend
Over the past 90 days, the Zacks Consensus Estimate for Tandem Diabetes’ 2021 earnings has moved 6.9% north to 31 cents. The company is slated to report fourth quarter and full-year 2021 results on Feb 22, after market close.
The Zacks Consensus Estimate for its 2021 revenues is pegged at $690.8 million, suggesting a 38.5% rise from the year-ago reported number.
Owens & Minor has a long-term earnings growth rate of 23.6%. Owens & Minor’s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 32.4%, on average.
Owens & Minor has outperformed the industry over the past year. OMI has gained 42.1% against a 15.6% industry decline in the said period.
Charles River has a long-term earnings growth rate of 14%. Charles River surpassed earnings estimates in the trailing four quarters, delivering a surprise of 10.6%, on average.
Charles River has gained 24% versus the industry’s 60% drop over the past year.
Molina Healthcare has a long-term earnings growth rate of 21.1%. Molina Healthcare’s earnings surpassed estimates in two of the trailing four quarters and missed estimates twice, delivering an average surprise of 4%.
Molina Healthcare has gained 35.7% compared with the industry’s 17.7% rise over the past year.
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Here's Why You Should Hold on to Tandem Diabetes (TNDM) for Now
Tandem Diabetes Care, Inc. (TNDM - Free Report) has been gaining from robust international pump shipments. The growing utilization of the company’s Control-IQ technology buoys optimism. Meanwhile, a highly competitive diabetes industry presents tremendous growth opportunities, raising investors’ confidence. A strong solvency position is another notable upside. However, persistent COVID-19 challenges and mounting operating expenses do not bode well for the company.
Over the past year, the Zacks Rank #3 (Hold) stock has gained 26.6% versus an 11.3% decline of the industry and the 17.7% rise of the S&P 500.
The renowned medical device company has a market capitalization of $7.50 billion. The company surpassed earnings estimates in the trailing four quarters, the average surprise being 84.5%.
The company’s earnings are projected to grow 161.3% next year, compared to the industry’s growth projection of 20% and the S&P 500’s estimated 10.9% growth.
Let’s delve deeper.
Factors at Play
Impressive Product Pipeline: Tandem Diabetes, in its earnings call for the third quarter, noted the availability of t:slim X2 technology in more than 20 countries worldwide. The company shipped more than 11,000 pumps outside the United States. During the reported quarter, the company’s Control-IQ technology was utilized by more than two-thirds of the 300,000 customers worldwide. The real-world experiences with Control-IQ technology were also found to be overwhelmingly positive. Further, Tandem Diabetes expects to benefit from new sensor offerings by CGM partners, DexCom and Abbott in 2022.
Diabetes Market Boom: Tandem Diabetes stands to gain from the rapidly growing diabetes industry, which is projected to be driven by factors like an aging population, unhealthy lifestyle, rising awareness and growing healthcare expenditure. Per a report by MarketsandMarkets, the global diabetes care devices market size is expected to reach $4.3 billion by 2025 from $1.7 billion in 2020, at a CAGR of 16.2%. Meanwhile, according to the Centers for Disease Control and Prevention, 34.2 million people of all ages or 10.5% of the U.S. population, had diabetes in 2018. Given the substantial prospects, Tandem Diabetes seems to be leaving no stone unturned to cash in on the bountiful opportunities in the niche market, raising optimism.
Strong Solvency: Tandem Diabetes exited third-quarter 2021 with cash and cash equivalents, and short-term investments of $595 million. The company has not reported any debt on its balance sheet at the end of the reported quarter, indicating strong solvency.
Downsides
Coronavirus Impact: The COVID-19 pandemic is wreaking havoc on the economy as a whole, with Tandem Diabetes facing the impact since its very onset. The company expects the pandemic’s increased variability to have a greater impact on its international markets, with the resurgence of the infection in some areas and strict precautionary measures in others.
Stiff Competition: Tandem Diabetes operates in a highly competitive environment, dominated by firms ranging from large multinational corporations with significant resources to start-ups. Also, the competitive and regulatory conditions in the company's markets limit its ability to switch to strategies like price increases.
Escalating Expenses: In the third quarter, Tandem Diabetes’ selling, general and administrative expenses rose 29.3%, whereas research and development expenses increased 49.8% on a year-over-year basis, respectively. The escalating costs are building pressure on the bottom line.
Estimate Trend
Over the past 90 days, the Zacks Consensus Estimate for Tandem Diabetes’ 2021 earnings has moved 6.9% north to 31 cents. The company is slated to report fourth quarter and full-year 2021 results on Feb 22, after market close.
The Zacks Consensus Estimate for its 2021 revenues is pegged at $690.8 million, suggesting a 38.5% rise from the year-ago reported number.
Key Picks
A few better-ranked stocks in the broader medical space are Owens & Minor, Inc. (OMI - Free Report) , Charles River Laboratories International, Inc. (CRL - Free Report) and Molina Healthcare, Inc. (MOH - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Owens & Minor has a long-term earnings growth rate of 23.6%. Owens & Minor’s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 32.4%, on average.
Owens & Minor has outperformed the industry over the past year. OMI has gained 42.1% against a 15.6% industry decline in the said period.
Charles River has a long-term earnings growth rate of 14%. Charles River surpassed earnings estimates in the trailing four quarters, delivering a surprise of 10.6%, on average.
Charles River has gained 24% versus the industry’s 60% drop over the past year.
Molina Healthcare has a long-term earnings growth rate of 21.1%. Molina Healthcare’s earnings surpassed estimates in two of the trailing four quarters and missed estimates twice, delivering an average surprise of 4%.
Molina Healthcare has gained 35.7% compared with the industry’s 17.7% rise over the past year.