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Could Abiomed Be a Millionaire-Maker Stock?

By Adria Cimino - Mar 10, 2021 at 6:00AM

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This medical device company has revenue growth, patents, and a bright outlook.

Abiomed (ABMD -0.75%) shares have tripled in value over the past five years. That's as the company brought its heart pumps to more and more patients. And recently, Abiomed even has become a player in the coronavirus market. The U.S. Food and Drug Administration has authorized its pumps for the treatment of some hospitalized coronavirus patients.

In more good news, the company reported record revenue in the most recent quarter. That happened even as hospitals delayed some medical procedures due to the coronavirus pandemic. As the crisis eases, it's logical to expect procedure volume to pick up. This should mean more revenue and profit on the horizon. But does it also mean buying Abiomed shares might make you a millionaire? Let's find out.

An investor smiles as she looks at a jar half full of coins and a stack of cash on a countertop.

Image source: Getty Images.

Impella heart pumps

Abiomed's Impella heart pumps treat patients whose heart can't pump enough blood and oxygen to organs. They're also used during procedures such as open-heart surgery. These pumps allow the heart to rest and recover. The FDA originally cleared the Impella 2.5 in 2008. Since, the agency has given a nod to the portfolio of Impella pumps for a variety of indications. Clearance for elective and urgent high risk percutaneous coronary intervention procedures came in 2015 -- and annual revenue has been on the rise ever since. Annual net income has generally gained too. 

Last August, the FDA authorized left-sided Impella pumps for coronavirus patients who develop fluid in the lungs or inflammation of the heart muscle while on life support systems. Earlier, the FDA authorized the Impella RP for use on COVID-19 patients suffering from right heart failure.

Abiomed's record revenue in the quarter ended Dec. 31 totaled about $232 million. That's a 5% gain over the same period in the previous year. Abiomed expects revenue in the current quarter to climb 9% to 14% year over year.

Can Abiomed meet that goal? There's reason to be optimistic. As mentioned earlier, hospitals are resuming more and more standard procedures that were put on hold during the worst of the pandemic. At the same time, Abiomed will see its Impella devices used in the new indications linked to COVID-19.

Patent positions

And as we look beyond the next quarter or two, patent positions should help Abiomed continue growing. The company holds more than 1,000 patents worldwide. And it has about 850 more pending. Why is this so important? These patents protect current and future product design and related features such as motors and software. Innovation -- and protecting innovation -- is key to maintaining and growing market share. And it's key to maintaining prices.

And this brings us to the subject of margins. Abiomed has progressively increased its operating margin over the past decade. It reported a 30% operating margin in the most recent quarter. That's around its highest level ever.

I also like the fact that Abiomed has more than $700 million in cash and marketable securities and no debt.

Will you make millions?

Does all of this make Abiomed a millionaire-maker stock? Well, let's imagine you have $10,000 to invest. And let's say Abiomed shares give us a repeat performance of the past five years. That would mean a share price of $900 five years from today. As much as I like Abiomed, that's looking rather high to me. But let's continue with this example. If you invested today, you would buy about 34 shares. That means if the shares tripled, your investment would then be worth $30,600. That's a great gain -- but you're far from millionaire territory.

Abiomed is a solid investment. It's likely revenue, profit, and the share price will rise in the coming years. The stock has stagnated this year after soaring 90% last year. I see this as a buying opportunity. But Abiomed probably won't make you a millionaire unless you make a huge investment in the stock. And in my opinion, to reach millionaire status, you're better off diversifying. So, betting on Abiomed and several other stocks is a better idea than betting on Abiomed alone.

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