Senseonics Holdings, Inc. (SENS) and Abbott Laboratories (ABT) are two established medical technology companies that manufacture and commercialize health care products internationally. Both companies are investing in the development of continuous glucose monitoring (CGM) devices and launching new models to grab significant market shares. While SENS’s produces Eversense and Eversense XL CGM devices, ABT offers diagnostic products, nutritional products, and pharmaceutical products in addition to CGM and other medical devices.
Lifestyle changes, limited physical activities, and changing consumer preferences amid the COVID-19 pandemic have all contributed to a significant surge in cases of type 1 and type 2 diabetes in the United States. The number of Americans with diagnosed diabetes is expected to increase to 29 million in 2050, according to the American Diabetes Association. As such, the demand for therapies offered by diabetes care devices producers such as SENS and ABT is expected to continue rising in tandem with the increasing incidence of the disease.
SENS has gained 191.2% over the past year, while ABT has returned 36.3% over this period. However, in terms of their past month’s performance, ABT is the clear winner with 4.9% gains versus SENS’ negative returns. So, which of these stocks a better pick now? Let’s find out.
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Latest Movements
In February, as part of their strategic collaboration, Ascensia Diabetes Care began selling and marketing activities for SENS’ Eversense XL CGM system in Germany, Italy, Netherlands, Poland, Spain and Switzerland. The initiative should deliver SENS’ solution to a bigger market and contribute to the company’s growth.
In January, the company closed a$115.0 million public offering of 59.74 million shares of common stock. It plans to use the offering’s proceeds for product development, to support the commercial launch of its 365-day product, and for working capital.
Last month, ABT received the authorization from Health Canada for expanded use of the FreeStyle Libre flash glucose monitoring system for pregnant women in hospital and professional health care settings. The device will be the only glucose monitoring technology in Canada that replaces the traditional finger-pricks system.
Recent Financial Results
During the fourth quarter, ended December 31, 2020, SENS’ total revenue was $3.9 million compared to $9.0 million for the fourth quarter of 2019. Its gross profit increased by $10.8 million year-over-year to $2.6 million. However, SENS reported a net loss of $101.6 million compared to $35.6 million in the fourth quarter of 2019. Its loss per share was $0.41 for this period. The increase in its net loss was due to a $90.6 million increase in expenses related primarily to non-cash accounting charges.
In the fourth quarter, ended December 31, ABT’s sales increased 28.7% year-over-year on a reported basis to $10.7 billion. The company’s operating earnings rose 75% from the year-ago value to $2.43 billion, while its net earnings grew 105.9% from the prior-year quarter to $2.16 billion. Its EPS rose 52.6% year-over-year to $1.45.
Past and Expected Financial Performance
ABT’s revenue has increased at a CAGR of 8.1% over the past three years. In comparison, SENS’ revenue declined at an annualized rate of 8.1% over this period.
SENS’ revenue is expected to rise 159.6% in the current year and 155.4 % next year. But a consensus EPS estimate indicates a 66.7% decline in the quarter ending June 30, 2021. In comparison, analysts expect ABT’s revenue to increase 21.9% in fiscal 2021. Also, the company’s EPS is estimated to increase 121% in the next quarter.
Profitability
ABT’s trailing-12-month revenue is significantly higher than SENS’. Also, ABT is more profitable, with a gross profit margin of 56.7% versus SENS’ negative returns.
However, SENS’ ROE of 233.7% compares favorably with ABT’s 13.9%.
Valuation
In terms of trailing-12-month Price/Sales, SENS is currently trading at 91.19x, 1336.1% higher than ABT, which is currently trading at 6.35x. Also, its forward EV/Sales of 74.32x is significantly higher than ABT’s 5.40x.
So, ABT is the more affordable stock.
POWR Ratings
ABT has a B overall rating, which equates to a Buy in our proprietary POWR Ratings system. However, SENS has an overall rating of D, which translates to Sell. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
In terms of Growth Grade, ABT has an A, signifying its higher growth potential. In comparison, SENS has a Growth Grade of B.
ABT has a B Sentiment Grade, which is in sync with analysts’ expectation about an increase in earnings and revenue. In comparison, SENS has a Sentiment Grade of F. Also, ABT has a Stability Grade of B, while SENS has an F.
Of the 234 stocks in the Medical - Pharmaceuticals industry, ABT is ranked #9. SENS is ranked #51 of 58 stocks in the D-rated Medical – Diagnostics/Research industry.
In addition to the grades we’ve highlighted, our POWR Ratings system has also rated both ABT and SENS for Value, Momentum, and Quality. Get all ABT ratings here. Also, click here to see the additional POWR Ratings for SENS.
The Winner
As the incidence of diabetes increases in the United States, both CGM device makers ABT and SENS are uniquely positioned to grow their shares significantly in the market for diabetes care devices. However, ABT appears to be a better buy based on the factors discussed here. ABT’s stock has more upside than SENS’, given that it is much larger and has a much more diverse healthcare division that should allow it to weather any financial setbacks and deliver solid gains in the near term.
Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to learn about the top-rated stocks in the Medical - Pharmaceuticals industry. Also, click here to access the top-rated stocks in the Medical – Diagnostics/Research industry.
Click here to checkout our Healthcare Sector Report for 2021
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ABT shares were trading at $123.41 per share on Friday morning, down $0.53 (-0.43%). Year-to-date, ABT has gained 13.58%, versus a 11.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.
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