Inspire Medical Systems, Inc. (INSP Quick QuoteINSP - Free Report) is well-poised for growth in the coming quarters, courtesy of its focus on research and development (R&D). The optimism led by a solid first-quarter 2024 performance and its global presence are expected to contribute further. However, concerns regarding overdependence on the Inspire system and a competitive landscape prevail.

Over the past year, this Zacks Rank #3 (Hold) stock has lost 49.3% compared with the 25.3% decline of the industry. The S&P 500 has witnessed 26.7% growth in the said time frame.

The renowned medical technology company focused on obstructive sleep apnea (OSA) has a market capitalization of $4.61 billion. The company projects 111.1% growth for 2024 and expects to maintain its strong performance. Inspire Medical has delivered an earnings surprise of 358.9% for the past four quarters, on average.

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Let’s delve deeper.

Strong Q1 Results: Inspire Medical’s solid first-quarter 2024 results buoy our optimism. The company recorded a robust improvement in the top and bottom lines. Strength in year-over-year U.S. revenues and revenues from outside the United States were seen. The gross margin expansion, despite rising product costs, was also witnessed.

Focus on R&D: Inspire Medical’s foundational commitment to driving innovation and improving patient lives fuels its continuous product development, raising our optimism. Per management, the company intends to invest in existing and next-generation technologies to further improve its products and clinical outcomes, optimize patient acceptance and comfort and broaden the patient population that can benefit from Inspire therapy.

Global Presence: Inspire Medical’s management is currently planning to continue to expand the size and geographic scope of the company’s direct sales organization to generate future revenue growth. This looks promising for the stock.

During first-quarter 2024, Inspire Medical activated 66 new U.S. centers, thus bringing the total to 1,246 U.S. medical centers providing Inspire therapy. The company also created 11 new U.S. sales territories in the quarter, bringing the total to 298 U.S. sales territories.

Downsides

Overdependence on Inspire System: Sales of Inspire Medical’s Inspire system accounted for primarily all its revenues for the past few years. Its ability to execute its growth strategy and become profitable will, therefore, depend upon the adoption of Inspire therapy to treat moderate-to-severe OSA in patients who are unable to use or get consistent benefits from continuous positive airway pressure. Management cannot ensure that the company’s Inspire therapy will achieve or maintain broad market acceptance among physicians and patients.

Competitive Landscape: The medical technology industry is highly competitive, subject to change, and significantly affected by new product introductions and other activities of industry participants. Inspire Medical’s competitors have historically dedicated and will continue to dedicate significant resources to promote their products or develop new products or methods to treat moderate to severe OSA. Inspire Medical considers its primary competition to be other neurostimulation technologies designed to treat OSA.

Estimate Trend

Inspire Medical has been witnessing a positive estimate revision trend for 2024. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved from a loss per share of 38 cents to earnings of 8 cents per share.

The Zacks Consensus Estimate for the company’s second-quarter 2024 revenues is pegged at $186.1 million, suggesting a 23.2% improvement from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks in the broader medical space are DaVita Inc. (DVA Quick QuoteDVA - Free Report) , Boston Scientific Corporation (BSX Quick QuoteBSX - Free Report) and Ecolab Inc. (ECL Quick QuoteECL - Free Report) .

DaVita, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 13.6%. DVA’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 29.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DaVita’s shares have gained 40.1% compared with the industry’s 24.1% rise in the past year.

Boston Scientific, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 12.5%. BSX’s earnings surpassed estimates in each of the trailing four quarters, with the average being 7.5%.

Boston Scientific has gained 41.4% against the industry’s 1.3% decline in the past year.

Ecolab, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 13.5%. ECL’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 1.3%.

Ecolab’s shares have rallied 36.2% against the industry’s 9.9% decline in the past year.