Surmodics, Inc. (SRDX Quick QuoteSRDX - Free Report) is well-poised for growth in the coming quarters, courtesy of its solid prospects in the thrombectomy business over the past few months. The optimism led by a solid fourth-quarter fiscal 2023 performance and its consistent efforts to boost research and development (R&D) are expected to contribute further. Yet, regulatory headwinds and data security threats persist.

Over the past year, this Zacks Rank #3 (Hold) stock has lost 7.5% compared with the 7.4% decline of the industry. The S&P 500 has witnessed 15.5% growth in the said time frame.

The renowned medical device and in-vitro diagnostics technology provider has a market capitalization of $484.3 million. Surmodics projects 71% growth for fiscal 2025 and is expecting to maintain its strong performance. SRDX’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average earnings surprise being 121.1%.

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Let’s delve deeper.

Consistent Efforts to Boost R&D: Surmodics’ solid efforts to improve its R&D stature have been a key growth driver, which raises our optimism. The company’s whole product solutions pipeline and sirolimus-based below-the-knee drug-coated balloon program deserve mention. Surmodics has been making progress using its internally developed .014 balloon platform.

In fiscal 2023, Surmodics’ R&D expenses were 35.1% of total revenues and were largely associated with its investments in vascular intervention product development, costs associated with the SurVeil drug-coated balloon (DCB) and regulatory infrastructure, facilities and personnel.

Thrombectomy Prospects Bright: Surmodics’ aim to leverage its proprietary Pounce thrombectomy platform technology to develop products raises our optimism. On the fourth quarter of fiscal 2023 earnings call in November, management confirmed that the feedback received from new and existing physician customers during the past quarter demonstrated the advantages of Surmodics’ Pounce and Sublime products.

In June, Surmodics received the FDA’s approval for the SurVeil DCB.

Strong Q4 Results: Surmodics registered a solid uptick in the overall top and bottom lines in the fourth quarter of fiscal 2023. The company recorded robust revenues from both segments and its primary sources. During the quarter, Surmodics advanced the initial commercialization of its Pounce arterial thrombectomy and Sublime radial access platforms. This looked promising for the stock.

Downsides

Regulatory Headwinds: Surmodics’ facilities and procedures are subject to periodic inspections by the FDA to determine compliance with the latter’s requirements. On account of non-compliance with applicable laws or regulations, the FDA could ban such medical devices. Any adverse regulatory action can potentially have a negative impact on Surmodics' business practices and operations.

Data Security Threats: Surmodics collects and stores sensitive data, including its proprietary business information, on its networks. The secure maintenance of this information is critical to its operations and business strategy. Despite Surmodics’ security measures, its information technology and infrastructure may be vulnerable to attacks by hackers, resulting from employee error or other disruptions.

Estimate Trend

Surmodics is witnessing a negative estimate revision trend for fiscal 2024. In the past 90 days, the Zacks Consensus Estimate for its loss per share has widened from 67 cents to $1.00.

The Zacks Consensus Estimate for the company’s first-quarter fiscal 2024 revenues is pegged at $29.7 million, suggesting a 19.2% improvement from the year-ago reported number.

Key Picks

Some better-ranked stocks in the broader medical space are DaVita Inc. (DVA Quick QuoteDVA - Free Report) , DexCom, Inc. (DXCM Quick QuoteDXCM - Free Report) and Integer Holdings Corporation (ITGR Quick QuoteITGR - Free Report) .

DaVita, sporting a Zacks Rank #1 (Strong Buy), has an estimated long-term growth rate of 18.3%. DVA’s earnings surpassed estimates in all the trailing four quarters, with an average surprise of 36.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.

DaVita’s shares have gained 42.5% compared with the industry’s 4.6% rise in the past year.

DexCom, carrying a Zacks Rank of 2 (Buy) at present, has an estimated long-term growth rate of 33.6%. DXCM’s earnings surpassed estimates in all the trailing four quarters, with an average of 36.4%.

DexCom’s shares have lost 1.4% compared with the industry’s 6.9% decline in the past year.

Integer Holdings, flaunting a Zacks Rank of 1 at present, has an estimated long-term growth rate of 15.8%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 11.9%.

Integer Holdings’ shares have rallied 31.4% against the industry’s 6.9% decline in the past year.