Open-heart surgery in patients that have suffered major cardiovascular events is risky, but it could be getting less so thanks to temporary heart pumps sold by Abiomed (NASDAQ:ABMD), a $17 billion market-cap medical devices company. Is Abiomed a stock worth including in your portfolio?

In this clip from Industry Focus: Healthcare, analyst Kristine Harjes and Motley Fool contributor Todd Campbell discuss why Abiomed's shares have doubled this year and what investors should know about this company's market opportunity.

A full transcript follows the video.

This video was recorded on May 30, 2018.

Kristine Harjes: Today, we're going to talk about Abiomed, which is a $17 billion market cap company whose stock has doubled since just January of this year. Both of these companies, Loxo Oncology in the front half of the show, and now Abiomed, have been very, very high performers, but they're both kind of under the radar.

Abiomed's flagship product line is the Impella heart pump, which is the world's smallest heart pump. Revenue has been growing very swiftly with seemingly no end in sight. Todd, what's your take on Abiomed?

Todd Campbell: I'm so excited to be talking about this stock. It's kind of funny, right, when you think about it. We oftentimes tend to expect the biggest returns coming from the biopharma area, not from the medical device area. When you see that return year-to-date, it's like, what?! [laughs] Double my money in a few months in this company? Especially for a company as big as this, right? $17 billion market cap! So, you have to ask yourself, what's the excitement here? What's the reason for excitement at Abiomed? And, what's the potential for this company to continue to grow and deliver for investors?

I think that you did a great job setting the stage here to understand that what they're doing is, through medical devices, they're attacking a very, very big need for devices that can help relieve the stress that gets put on the heart following a heart attack. If you're able to relieve the heart from that stress of pumping on its own, either prior to or during surgery, or in the hours and potentially the days following that surgery, then you can get better outcomes. You can have less of a risk of complications, less of a risk of a readmittance back to the hospital after they've been sent home, and less time overall spent within the hospital, which theoretically can save payers some money there, too.

So, really, what we're talking about is the Impella heart pumps. Those are used temporarily from hours to a few days. They're used in patients who are at a critical risk -- they've had a heart attack and they're also in shock.

Harjes: Yeah, absolutely. This is a very, very large market. Heart disease, as many of our listeners will know, is the leading cause of death in the United States. It kills 875,000 people per year. It costs our healthcare system $555 billion, which is estimated to grow to $1.1 trillion annually by 2035. In that same year, 2035, it's estimated that 45% of the United States population will have heart disease, which is just a frightening and insane statistic.

Abiomed is estimating that about 221,000 U.S. patients per year would benefit from procedures using their Impella product. Despite seeing double-digit growth for revenue for quite a while, they still have a pretty long runway. They're just getting started. They don't seem to have any substantial competitors. They have that first-mover advantage. It looks like it could be early days for this company.

Campbell: Fiscal year 2017, their sales grew 35% to $445 million. In fiscal year 2018, their sales grew, again, by 33%, to $594 million. I think what got people really excited was the fact that that was better than the guidance. The guidance was for 31% growth, $582 million.

The other thing that investors should know is that this has been a profitable company since 2012. They're making money. They had $90 million in operating income in fiscal 2017, and then, that jumped in fiscal 2018, just finished up, to $157 million. So, up 74%. Your operating income grew at a much faster rate than your revenue growth, which suggests to me that as these devices are getting used more frequently, they're able to leverage their fixed costs and really accelerate their profitability for investors. Maybe that's one of the reasons that the company is debt free and its cash stockpile has been growing for three consecutive years.

Harjes: Yeah. The stats that I mentioned were U.S. stats, but they're not even just based in the United States. They're also in Europe, they have approvals there. They launched in Japan in September. They have a presence in Germany. And even though expansion is kind of slow -- and management routinely reminds investors that it has to be slow in order to ensure good outcomes, because you need to be trained to use these pumps, it's not something that you can just drop off and go away -- they have the entire world out there that they're just starting to reach. And when you think about the demographic trends in general across the entire globe of an aging population, I've said it so many times already just in this one segment, but they really do seem like they have a huge runway ahead of them.

Campbell: Well, just to put that into context, in the fiscal fourth quarter, the one that just wrapped up, their overseas sales, their ex-U.S. sales, were only $22 million. So, a very small proportion of their total sales is coming from the international markets right now. And, by the way, that was up 107% year over year, and it was really tied to one country: Germany. So, as Japan starts to accelerate, as other countries start to get more interested in the opportunity to use Impella, I think that, yeah, you could see sales grow substantially. The company, Kristine, estimates this is a $5 billion market opportunity, and they say that they're only about 9% penetrated into it.

Harjes: Yep. And the other thing that's important to realize about the business model is that there's recurring revenue. Their hospital reorder rate stands at over 90%. So, it's sticky. Once you're trained on using these, you're probably not going to move to a competitor. I saw on the fool.com Premium side of things in our Supernova service, an analyst compared this company to Intuitive Surgical, which is the robotic surgery giant. She pointed out that there were similarities in the business model, where you have that recurring revenue, there's a product that will become the standard of care, there's a long growth runway, and really solid financials. I like that comparison a lot.

I think one more thing to add to the list of why these two companies are fairly similar is a nosebleed valuation. This company is definitely not cheap, they're trading at about 30X the last 12 months of sales. Their P/E is several hundred, and that's TTM. It's not even that much better when you look on a forward basis. But, like you said, they have a very strong balance sheet. They've been profitable since fiscal 2012. So, I see a lot of similarity with Intuitive.

Campbell: Yeah. Value investors are not going to be tucking this in a portfolio, similar to what we were talking about last week on the diabetes show. These things are richly valued. But, that's not necessarily a reason to not have a stock like this in your portfolio. You need to take that valuation in the context of where the company's sales could be in five or ten years. You have to take that longer-term look and say, if they're only 9% penetrated into this massive market now, can they grow into that valuation? I'll let someone smarter than me make the answer to that. But, I'm very, very excited by the opportunity to really improve a lot of people's lives. This is a medical device that can save lives. That makes the potential for it to be a must-use device in hospitals, not a nice-to-have device.

Kristine Harjes has no position in any of the stocks mentioned. Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. Motley Fool owns shares of and recommends Abiomed and ISRG. The Motley Fool has a disclosure policy.