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Here's Why You Should Retain Nevro (NVRO) Stock For Now

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Nevro Corp. (NVRO - Free Report) is well poised for growth in the coming quarters, backed by its solid foothold in the Spinal Cord Stimulation (“SCS”) market. A solid fourth-quarter 2021 performance, along with continued strength in its flagship Senza platform, is expected to contribute further. However, stiff competition and strict regulatory requirements persist.

Over the past year, this Zacks Rank #3 (Hold) stock has lost 48.3% against 5.3% growth of the industry and the S&P 500 composite’s 17.1% rise.

The renowned global medical device company has a market capitalization of $2.53 billion. The company projects 22.6% growth for 2022 and expects to maintain its strong performance. Nevro’s earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters, missed the same in one and broke even in the other, the average earnings surprise being 3.2%.

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Let’s delve deeper.

Solid Foothold in SCS market: Nevro’s foothold in the global SCS therapy business raises our optimism on the stock. The company, in March, announced that Noridian has released an update to its Local Coverage Billing and Coding article for spinal cord stimulators for chronic pain to include two new ICD-10 codes that cover Painful Diabetic Neuropathy (“PDN”).

In January, the company received the FDA’s approval for expanded labeling for its Senza SCS System associated with the treatment of non-surgical refractory back pain (“NSRBP”). The approval, specific to Nevro's exclusive 10 kHz Therapy, categorizes the Senza System as the only SCS system with specific labeling to treat NSRBP patients.

Strength in Senza: We are optimistic about Nevro’s continued strength in its flagship Senza platform. Based on analysis from the company’s SENZA- Randomized Controlled Trial (“RCT”) and European studies, as well as the SENZA-PDN and SENZA-NSRBP RCTs, Nevro believes the 10 kHz Therapy may be an attractive treatment option for patients. Due to the removal of paresthesia, the company believes that the 10 kHz Therapy can also be effective for patients with chronic upper limb and neck pain as it does not create intense discomfort like traditional SCS.

Strong Q4 Results: Nevro’s better-than-expected fourth-quarter 2021 revenues buoy optimism. The company recorded an improvement in trial procedures in the reported quarter. It received FDA approval for 10 kHz high frequency SCS therapy for NSRBP, which raises our optimism. Positive 12-month follow-up results from the SENZA-NSRBP RCT and SENZA-PDN RCT are also encouraging.

Downsides

Regulatory Requirements: Nevro’s products are subject to extensive regulations in the United States and elsewhere, which are complex and have tended to become more stringent over time. Regulatory changes could result in restrictions on Nevro’s ability to carry on or expand its operations, as well as higher-than-anticipated costs or lower-than-anticipated sales. Failing to maintain the FDA approval could result in unexpected and significant costs for the company and consume management’s time and other resources.

Stiff Competition: Nevro operates in a highly competitive medical device industry, which is subject to technological change. The company’s success depends partly on its ability to establish a competitive position in the neuromodulation market by securing broad market acceptance of its HF10 therapy and Senza products for the treatment of approved chronic pain conditions. Any product developed by Nevro that achieves regulatory clearance or approval will have to compete for market acceptance and market share.

Estimate Trend

Nevro witnessed a negative estimate revision trend for 2022. In the past 90 days, the Zacks Consensus Estimate for its loss per share has widened from $2.54 to $2.92.

The Zacks Consensus Estimate for the company’s first-quarter 2022 revenues is pegged at $86.1 million, suggesting a 2.8% plunge from the year-ago quarter’s reported number.

Key Picks

A few stocks from the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN - Free Report) , IDEXX Laboratories, Inc. (IDXX - Free Report) and Henry Schein, Inc. (HSIC - Free Report) .

AMN Healthcare has an estimated long-term growth rate of 16.2%. AMN’s earnings surpassed estimates in the trailing four quarters, the average surprise being 20%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare has gained 44.4% against the industry’s 52.7% fall over the past year.

IDEXX, carrying a Zacks Rank #2 (Buy), has an estimated long-term growth rate of 13%. IDXX’s earnings surpassed estimates in the trailing four quarters, the average surprise being 18.6%.

IDEXX has gained 12.8% compared with the industry’s 5.3% growth over the past year.

Henry Schein has an estimated long-term growth rate of 11.8%. HSIC’s earnings surpassed estimates in the trailing four quarters, the average surprise being 25.5%. It currently has a Zacks Rank #2.

Henry Schein has gained 28.2% compared with the industry’s 11.2% growth over the past year.