) have been on an upswing since reporting a solid fiscal third
quarter in early August, and recently hit its 52-week high of
$22.11 on October 3. With a year-to-date return of more than 49%, a
strong financial position and improving fundamentals, this Zacks #2
Rank (Buy) provider of drug delivery and surface modification
technology looks like a good momentum pick.
Solid 3Q and Upbeat Guidance
On August 1, SurModics reported fiscal third-quarter adjusted
earnings per share of 17 cents, beating the Zacks Consensus
Estimate by nearly 31% and the year-ago earnings by more than 40%.
Adjusted revenues jumped 17.5% year over year to $13.7 million,
surpassing the Zacks Consensus Estimate of $12 million.
Revenues on a reported basis (including special items) were up 7.4%
to approximately $14 million, due to increased sales from vitro
diagnostics and hydrophilic coatings.
` Encouraged by the strong performance, SurModics raised its
forecast for fiscal 2012 to between 56 cents and 59 cents per share
on revenues of $51 million to $52 million. The previous guidance
had earnings between 45 cents and 53 cents on revenues of $47
million - $51 million.
Earnings Momentum on the Rise
Over the last 90 days, the Zacks Consensus Estimate for fiscal 2012
jumped 17.6% to 60 cents, representing year-over-year improvement
of 88.3%. For fiscal 2013, the Zacks Consensus Estimate has
increased 28.6% to 81 cents over the same time period, implying
year-over-year growth of 33.6%.
On a price-to-book (P/B) basis, shares are trading at 2.55x,
compared with the peer group average of 1.98x. Also, the company
has a price-to-sales (P/S) ratio of 5.76, a 182.4% premium to the
peer group average of 2.04.
However, on a forward P/E basis, shares trade at approximately
27.0x, a discount to the peer group average of 33.20x. Also, the
company has a trailing 12-month return on equity (ROE) of 5.8%,
which is above its peer group average of 5.4%. This implies that
the company reinvests its earnings more efficiently than its peers.
A Look at the Chart
SurModics took a number of steps to increase efficiencies,
including trimming its work-force and appointing a new CEO.
Moreover, the company's move to sell its Pharmaceutical unit to
focus on its core business is a prudent move.
The chart below shows that the stock has been consistently trading
above both the 200-day and 50-day moving averages since early
August 2012. Volume is fairly strong, averaging roughly 130K daily.
The stock delivered a year to date return of 49.7%, outperforming
the S&P 500's return of 13.6%.
SurModics, formerly known Bio-Metric Systems, Inc, was founded in
1979 and is headquartered in Eden Prairie, Minnesota. The company,
a provider of surface modification and drug delivery technologies
to the healthcare industry, has a market cap of $313.36 million.
Until fiscal 2011, SurModics operated through three business units:
Medical Devices, Pharmaceuticals and In Vitro Diagnostics. However,
in November 2011, SurModics sold the assets of the Pharmaceuticals
division to Germany's Evonik Industries AG. Since the first quarter
of fiscal 2012, SurModics reports through two divisions - Medical
Devices and In Vitro Diagnostics.
Want More of Our Best Recommendations?
Zacks' Executive VP, Steve Reitmeister, knows when key trades are
about to be triggered and which of our experts has the hottest
hand. Then each week he hand-selects the most compelling trades and
serves them up to you in a new program called
SURMODICS (SRDX): Free Stock Analysis Report
To read this article on Zacks.com click here.