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Here's Why You Should Retain ShockWave Medical (SWAV) Stock

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ShockWave Medical, Inc. (SWAV - Free Report) is well-poised for growth, backed by research and development (R&D) efforts and a focus on clinical studies. However, limited commercial experience is a concern.

Shares of this Zacks Rank #3 (Hold) stock have gained 52.4% compared with the industry’s growth of 0.1% in a year’s time. The S&P 500 Index has rallied 14.3% in the same time frame.

The company — with a market capitalization of $6.34 billion — is a medical device company committed to developing and commercializing products created to change the way calcified cardiovascular disease is treated. The company’s earnings yield of 0.8% compares favorably with the industry’s (4.6%). The company beat earnings estimates in three of the trailing four quarters and missed once, the average surprise being 148.2%.

What’s Driving the Performance?

ShockWave Medical invests in research and development (R&D) efforts that accelerate its IVL Technology to broaden and enhance its existing product offerings. In the fourth quarter of 2021, the company incurred R&D expenses of $14.7 million, up 62.7% from the prior-year quarter.

The company believes in its ability to rapidly develop innovative products owing to the dynamic product innovation process implemented. The versatility and leveragability of its core technology, and management philosophy are tailwinds that continue to improve the R&D process. The company has recruited and retained engineers and scientists with substantial expertise when it comes to the development of medical devices. The company’s pipeline of products in various stages of development is anticipated to provide additional commercial opportunities.

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Since its inception, ShockWave Medical has remained committed to generating clinical data to show the safety and effectiveness of its IVL Technology. These initial studies have consistently highlighted low rates of complications irrespective of the type of vessel that was being studied. Apart from getting regulatory approvals or clearances, the data from the company’s clinical studies strengthen its ability to drive the adoption of Intravascular Lithotripsy (IVL) Technology throughout multiple therapies in existing and new market segments. ShockWave Medical’s past studies have guided optimal IVL procedure technique and informed the design of its IVL System and future products in development.

Apart from this, the company has ongoing clinical programs throughout several products and indications, and if successful, these will enable the company to expand the commercialization of its products into new geographies and indications.

During the fourth quarter of 2021, the company enrolled the first patient in its Disrupt BTK II global post-market study, which is designed to assess the long-term benefit of peripheral IVL on the most difficult calcified below-the-knee lesions. During the quarter under discussion, Centers for Medicare & Medicaid Services (CMS) reassigned payment for peripheral IVL procedures performed on above the knee (ATK) arteries in the hospital outpatient setting. This, in turn, can aid in enhancing the payments that hospitals receive for these procedures.

What’s Weighing on the Stock?

Limited commercialization expertise and approved or cleared products pose a challenge for the company to evaluate its current business and project future prospects. It also makes it cumbersome for the company to predict its future financial performance and growth.

Estimates Trend

For 2022, the Zacks Consensus Estimate for revenues is pegged at $420.62 million, indicating an improvement of 77.4% from the year-ago period’s reported figure. The same for adjusted earnings per share stands at $1.47, suggesting growth of 665.4% from the prior-year reported figure.

Stocks to Consider

Some better-ranked stocks from the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Henry Schein, Inc. (HSIC - Free Report) and Patterson Companies, Inc. (PDCO - Free Report) .

AMN Healthcare surpassed earnings estimates in each of the trailing four quarters, the average surprise being 20%. The company currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare’s long-term earnings growth rate is estimated at 16.2%. AMN’s earnings yield of 8.8% compares favorably with the industry’s 0.3%.

Henry Schein beat earnings estimates in each of the trailing four quarters, the average surprise being 25.5%. The company currently carries a Zacks Rank #2 (Buy).

Henry Schein’s long-term earnings growth rate is estimated at 11.8%. HSIC’s earnings yield of 5.6% compares favorably with the industry’s 4.1%.

Patterson Companies surpassed earnings estimates in three of the trailing four quarters and missed once, the average surprise being 2.7%. The company currently carries a Zacks Rank #2.

Patterson Companies’ long-term earnings growth rate is estimated at 9.9%. PDCO’s earnings yield of 6.9% compares favorably with the industry’s 3.7%.