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Why TransEnterix, Inc. Stock Bolted Higher Today

By George Budwell - May 21, 2018 at 5:28PM

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TransEnterix's shares are continuing to head higher after a strong first-quarter earnings report earlier this month.

What happened

Shares of the robotic surgery company TransEnterix (ASXC -0.36%) ended the day higher by a healthy 12.8%. The catalyst? 

The robotic surgery company's shares perked up in response to a bullish note by RBC Capital analyst Glenn Novarro. Specifically, Novarro stated that the commercial launch of TransEnterix's newly approved Senhance system should only continue to gain momentum going forward, and the system's sales should more than double from current levels before year's end.

TransEnterix's stock is now up by an impressive 80.5% this month, thanks in large part to Senhance's better-than-expected commercial launch. 

Rocket taking flight.

Image Source: Getty Images.

 

So what

When TransEnterix's Senhance system was first approved last October, Wall Street wasn't overly optimistic that the company could effectively compete against Intuitive Surgical's entrenched da vinci system. Intuitive, after all, has an 18-year head start, and robotic surgery platforms require extensive training to operate and maintain.

In other words, it wasn't a given that conservative-minded hospital administrators would be willing to take a chance on a novel robotic surgery platform manufactured by a company with a less-than-stellar balance sheet. However, TransEnterix is so far proving the naysayers wrong, with the company already selling a whopping five units right out of the gate.  

Now what

Looking ahead, TransEnterix is working toward broadening Senhance's commercial opportunity via a label expansion that would cover both laparoscopic inguinal hernia and laparoscopic gallbladder surgeries. The U.S. Food and Drug Administration is expected to make its regulatory decision on this label expansion by midyear.

Before investors get too excited, however, it's important to bear in mind that TransEnterix's shares are now trading at a forward-looking price-to-sales ratio of around 17, implying that most of the stock's near-term upside potential is already baked into the price right now. So, it's probably not a good idea to enter at this point unless you are willing to hold the company's shares for an extended period.

 

George Budwell has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Intuitive Surgical. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Asensus Surgical, Inc. Stock Quote
Asensus Surgical, Inc.
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$0.56 (-0.36%) $0.00
Intuitive Surgical, Inc. Stock Quote
Intuitive Surgical, Inc.
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$239.13 (-0.49%) $-1.19

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