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Here's Why You Should Retain Merit Medical (MMSI) for Now

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Merit Medical Systems (MMSI - Free Report) is gaining traction on portfolio expansion and solid prospects in its Peripheral Intervention unit. However, tough competition has been offsetting the positives to some extent.

The company, with a market capitalization of $2.39 billion, is a leading developer of peripheral and cardiac intervention products. The company’s earnings are expected to improve 12.6% over the next five years. Also, this Zacks Rank #3 (Hold) company has a trailing four-quarter positive earnings surprise of 1.2%, on average.

In the past three months, the stock has gained 5.3% against the 8% decline of its industry.

Let’s delve deeper into the factors working in favor of the company.

New Products:  The company has gained significant momentum on new products and is optimistic about its pipeline, which comprises radio and electrophysiology products.

Merit Medical expects to launch Aspira pleural drainage, pleural effusion and peritoneal drainage products between second and third-quarter 2020 in Europe, Canada, Australia. Another important product – Surfacer – is a device in which the company has an equity interest.

It is important to note here that the company will move 14 new products from Salt Lake City and one or two other facilities to either Texas or Mexico. This product portfolio expansion  is expected to drive growth in the future.

Developments on Regulatory Front: Positive feedbacks and approvals from the top-notch regulatory bodies have favored Merit Medical in recent times. Recently, the company confirmed that it has more than 50 active R&D products in its portfolio.

During February 2020, the company received approval for its steerable microcatheter, SwiftNinja. Additionally, Merit Medical received approval for its Amplatz Guide Wires. The company also received approval for its SureCross support catheter.

In April, the company was granted two additional Breakthrough Device designations by the FDA for the Merit WRAPSODY Endovascular Stent Graft System. The system is a flexible, self-expanding endoprosthesis. This regulatory clearance is expected to bolster the company’s cardiovascular segment.The CE mark of the product is likely to come through in May 2020. The company is just weeks away from submitting its application for an IDE with the U.S. government.

These approvals are significant developments with respect to driving the company’s performance.

Peripheral Intervention Unit Holds Promise: The company’s peripheral intervention unit consists of Peripheral Drainage & Biopsy, Peripheral Angiography, Peripheral Intervention and Peripheral Access Portfolio. Merit Medical also offers low-profile ASAP Aspiration Catheters, which provide clinicians with two options for the safe and efficient removal of fresh, soft emboli and thrombi from vessels. During the first quarter of 2020, the Peripheral Intervention unit saw 2.9% growth in revenues on increased demand for its access and drainage products.In the recent past, Merit Medical announced a new project of biopsy devices that are under development. This is likely to boost the company’s R&D prospects in the quarters to come.

However, there is a factor marring growth.

Cut-throat Competition: In the interventional cardiology, radiology, gastroenterology, endoscopy, general surgery, thoracic surgery and pulmonology markets, Merit Medical competes with large international, multi-divisional medical supply companies such as Cardinal Health, Boston Scientific Corporation, Medtronic, Abbott.

Estimates Trend

The company is witnessing a negative estimate revision trend for fiscal 2020 earnings. Over the past 30 days, the Zacks Consensus Estimate for the same has declined 30.7% to $1.04 per share.

The Zacks Consensus Estimate for the company’s second-quarter 2020 revenues is pegged at $193.2 million, suggesting a 24.4% fall from the year-ago reported number.

Key Picks

Some better-ranked stocks from the broader medical space are Aphria. (APHA - Free Report) , DexCom (DXCM - Free Report)  and HMS Holdings (HMSY - Free Report) .You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Aphria’s long-term earnings growth rate is estimated at 24.6%. The company presently carries a Zacks Rank #2 (Buy).

DexCom’s long-term earnings growth rate is estimated at 36.3%. The company presently carries a Zacks Rank #2.

HMS Holdings’ long-term earnings growth rate is estimated at 10%. It currently carries a Zacks Rank #2.

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