While most biotech stocks lost ground last year, shares of the robotic surgery company TransEnterix (NYSEMKT:TRXC) actually performed quite admirably by gaining a noteworthy 17.1% in 2018, according to data from S&P Global Market Intelligence.
Why did this small-cap biotech buck the broader downward trend across the industry last year? The singular reason was the better-than-expected commercial launch of TransEnterix's Senhance robotic surgery system.
Since the Senhance system was entering a space dominated by Intuitive Surgical's da Vinci Surgical System, Wall Street didn't have particularly high expectations for TransEnterix's rival system from a commercial standpoint last year. Intuitive, after all, had a nearly two-decade head start, established long-term relationships with hospitals and surgeons alike, and far more resources than TransEnterix. However, TransEnterix proved the naysayers wrong by selling a whopping 15 Senhance systems over the course of 2018 and generating a healthy $24 million in sales for the year.
The good news is that Wall Street has started to change its tune toward TransEnterix's growth potential. In fact, the average analyst estimate has the company's top-line rising by yet another 52.9% in 2019. Unfortunately, the biotech's shares have already built in most, if not all, of this near-term sales growth.
TransEnterix's stock, after all, currently sports a forward-looking price-to-sales ratio of 16.1. That kind of sky-high valuation doesn't bode well for further appreciation -- at least over the next 12 months or so. As such, this small-cap biotech stock probably doesn't belong in your portfolio right now unless you are dedicated to holding it for a prolonged period of time.