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Here's Why You Should Hold on to Cardiovascular Systems (CSII)

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Cardiovascular Systems, Inc. (CSII - Free Report) has been gaining from strong global performance in the coronary franchise. Robust progress in international markets, including Japan and Europe, seems encouraging. The upcoming launch of Scoreflex NC Scoring Balloon buoys optimism. However, consistent net loss and tough competition raise apprehension.

Over the past year, the Zacks Rank #3 (Hold) stock has declined 42.5% compared with a 18.8% fall of the industry and a 7.3% rise of the S&P 500.

The renowned medical device manufacturer has a market capitalization of $885.03 million. Cardiovascular Systems reported a loss of 23 cents per share for second-quarter fiscal 2022, wider than the Zacks Consensus Estimate of a loss of 14 cents.

The company’s projected growth rate of 2.2% for the next five years compares with the industry and the S&P 500’s projected growth rate of 16.6% and 11%, respectively.

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Let’s delve deeper.

Factors at Play

Impressive Portfolio Expansion: Cardiovascular Systems has long been expanding its product portfolio to enhance its market reach and versatility. During the second quarter of fiscal 2022, the company noted that it is currently in the process of launching the Scoreflex NC Scoring Balloon in the United States, post the receipt of FDA pre-market (PMA) approval. The company also announced the development of intravascular lithotripsy balloons to treat coronary and peripheral artery diseases.

Focus on International Business: We are encouraged by Cardiovascular Systems’ continued efforts to expand its geographical presence. In the fiscal second quarter, international revenues increased 62% year over year on robust progress in Japan and Europe. The company certified nearly 70 coronary interventionalists outside the United States. The company also launched coronary devices in six countries in the reported quarter.

On its fiscal second-quarter earnings call, Cardiovascular Systems noted that it is on track to be commercial in more than 30 countries by the end of 2022.

Q2 Upsides: Cardiovascular Systems’ coronary franchise recorded revenue growth of 60% year over year outside the United States, led by continued strength in Japan and the launch of the coronary Orbital Atherectomy System (OAS) in Europe. The company sold $751 of support products for every coronary OAS sold. Peripheral ISD sales increased to $1.2 million following the successful launch and adoption of the JADE balloons.

The company also reached numerous key development and pre-clinical testing milestones on its pVAD device for high-risk percutaneous coronary intervention. The receipt of the FDA’s PMA approval of the Scoreflex NC scoring balloon raises investors’ confidence.

Downsides

Dull Sales Scenario: Revenues at the peripheral business declined significantly in the fiscal second quarter, domestically and internationally. Meanwhile, coronary revenues fell 7% year over year in the United States. Cardiovascular Systems anticipates its domestic revenues to decline sequentially in the fiscal third quarter.

Net Loss Continues to Impact: On the profitability front, Cardiovascular Systems bears a long history of incurring net losses. Although it had generated net profit of $1.7 million in fiscal 2018, sustainability is a matter of concern. The company reported net loss of $13.4 million for fiscal 2021. The situation remained unchanged in the second quarter of fiscal 2022 as well.

Competitive Headwinds: Cardiovascular Systems’ OAS products compete with a variety of products or devices intended to treat vascular disease. The company also competes against manufacturers of atherectomy catheters in the MedTech sector.

Estimate Trend

Over the past 90 days, the Zacks Consensus Estimate for Cardiovascular Systems’ 2022 loss has moved down from 46 cents to 98 cents.

The Zacks Consensus Estimate for the company’s 2022 revenues is pegged at $237.3 million, suggesting an 8.4% fall from the 2021 reported number.

Key Picks

A few better-ranked stocks in the broader medical space are Owens & Minor, Inc. (OMI - Free Report) , Abiomed, Inc. (ABMD - Free Report) and McKesson Corporation (MCK - Free Report) .

Owens & Minor has a long-term earnings growth rate of 8.8%. Owens & Minor’s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 29.5%, on average. It currently flaunts a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Owens & Minor has outperformed the industry over the past year. OMI has gained 12.5% against a 18.8% industry decline in the said period.

Abiomed has an estimated long-term growth rate of 20%. Abiomed’s earnings surpassed estimates in the trailing four quarters, the average surprise being 9.2%. It currently carries a Zacks Rank #2.

Abiomed has underperformed the industry over the past year. ABMD has lost 9.3% against the industry’s 3% fall over the past year.

McKesson has a long-term earnings growth rate of 11.8%. McKesson’s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 20.6%, on average. It presently carries a Zacks Rank #2.

McKesson has outperformed the industry over the past year. MCK has gained 69.2% in the said period compared with 7.2% growth of the industry.