Shares of Bioventus BVS have surged 73% in the past three months, significantly outperforming the industry’s 1.3% growth. The stock has outperformed the sector and the S&P 500 during the same period. BVS' shares are also trading above the 50-day and 200-day moving averages.
BVS Stock Outperforms Industry, Sector & S&P 500
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This uptick in stock price was triggered by the company’s encouraging sales performance across its business segments, especially the Pain Treatments and Surgical Solutions franchises, in the past three quarters. Based on this revenue growth, management raised the 2024 guidance twice this year.
Rapid Sales Growth Boosts BVS Stock
A healthcare company specializing in minimally invasive treatments, Bioventus is focused on marketing products that support the body's natural healing process. It operates in three main areas, namely Pain Treatments, Restorative Therapies and Surgical Solutions.
The company has been experiencing significant growth in its pain treatment and surgical solutions businesses, primarily due to effective sales strategies. Organic sales increased nearly 14% year over year in the second quarter of 2024, continuing a positive trend of double-digit growth. Based on this success, Bioventus is increasing production to ensure that it can meet the growing demand for its products in the upcoming quarters.
BVS Upgrades 2024 Outlook Twice
Management raised its financial guidance for 2024 twice this year, driven by accelerated revenue growth and strong execution of strategic priorities. Its net sales are now expected to be between $557 million and $567 million in 2024 (compared with the original guidance of $520-$535 million).
Earnings per share are expected to be in the range of 36-42 cents compared with the original guidance of 12-20 cents. Adjusted EBITDA is expected to be between $104 million and $107 million, up from the original guidance of $89-$94 million.
BVS Prioritizes Improving Financial Efficiency & Liquidity
Bioventus is witnessing an improvement in revenues and profitability. To achieve this, management is focusing on businesses that generate higher profits. In this regard, management sold its Wound business last year to LifeNet Health for $85 million. Earlier this month, management also announced its decision to divest BVS’ Advanced Rehabilitation business to private equity firm Accelmed Partners for a total cash consideration of $45 million. The deal is expected to be closed by the end of this year.
These divestitures not only help BVS expand its margins but also increase cash flow, which can be used to expand its existing business or reduce its existing leverage. During the second quarter of2024, adjusted EBITDA increased 22% year over year while adjusted gross margin expanded 180 basis points to 75.8%.
Bioventus has made significant progress in reducing its debt. Management has already brought the debt level below four times and aims to reduce it to less than three times by the end of next year.
BVS Stock Valuation & Estimates
The company is trading at a discount to the industry. Going by the price/sales ratio, the stock currently trades at 1.52, trailing 12-month sales value, lower than 2.17 for the industry.
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Estimates for Bioventus’ 2024 and 2025 earnings per share (EPS) have remained consistent in the past 60 days at 40 and 45 cents, respectively.
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Conclusion
Bioventus stock is worth adding to one’s portfolio, considering its strong commercial execution. Management’s focus on three major areas — accelerating top-line growth, boosting profitability and improving liquidity position — seems to be working well for the stock. This three-fold focus has helped BVS expand its presence in the medical products market, which has a large number of players, including J&J JNJ and Medtronic MDT. As the stock currently trades at a discount to the industry, we recommend investors to add this Zacks Rank #2 (Buy) company to their portfolio.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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