What happened

After the company reported second-quarter revenue that was better than industry watchers expected, shares of iRhythm Technologies (NASDAQ:IRTC) rallied 11.5% on Thursday.

So what

iRhythm uses wearable biosensor devices that can be worn for up to 14 days and cloud-based data analytics to analyze heartbeats to diagnose and monitor arrhythmia in heart disease patients. 

A man in a suit speaking into a megaphone in front of a chart displaying the world map and an ascending stock price.

IMAGE SOURCE: GETTY IMAGES.

In the second quarter, revenue was $35.5 million, up 49% from Q2 2017, or up 55% on a pro forma basis that includes accounting changes. Sales in the quarter were $3 million better than analysts were predicting and 16% higher than they were in Q1 2018.

Operating expenses increased more rapidly than sales because of investments in additional salespeople, so net losses worsened to $12.2 million from $6.4 million during the same period in 2017.

Now what

The company's reinvestment back into itself to bolster products and its sales effort could help drive revenue higher later this year. Management's new guidance is for full-year sales of between $138 million and $141, which would represent 45% to 48% growth from 2017 after including the effects of accounting changes. Previously, guidance was for between $128.5 to $133.5 million in sales.

It's unclear when iRhythm could turn the corner to profitability, but guidance for operating expenses of $143 million to $147 million suggests management's making progress toward that goal.

Healthcare payers are increasingly looking for ways to better manage cardiac patients to avoid costly hospitalizations, and the addressable market for cardiac monitoring is big. Eleven million Americans have heart arrhythmia and 6 million people have atrial fibrillation, a leading cause of stroke, so the potential to continue delivering significant sales growth makes this an intriguing stock to own in growth portfolios.

 

Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.