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Why Asensus Surgical Stock Is Moving Up Today

By Cory Renauer – Nov 4, 2021 at 11:20AM

Key Points

  • Asensus Surgical sells a robot-assisted surgery system called Senhance Surgical.
  • After the market closed on Wednesday, the company reported third-quarter results that impressed investors.
  • Unfortunately, demand for the Senhance Surgical system is too weak to produce a positive gross profit.

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Earnings results for the third quarter look great, until you peek under the hood.

What happened

Shares of Asensus Surgical (ASXC -0.52%), a manufacturer of robot-assisted surgical systems, are on the rise after the company released third-quarter earnings. Investors reacting to the highlights drove the stock 14.6% higher as of 10:38 a.m. EDT on Thursday.

So what 

After markets closed yesterday, Asensus Surgical was able to report heaps of good news. Near the top of the list was the initiation of four new Senhance Surgical systems, three in Japan and one in Russia.

Smart investor figuring stuff out.

Image source: Getty Images.

With more Senhance Surgical systems in place, the company was able to report a 47% year-over-year bump in the number of procedures performed. It said that it was a record quarter for procedure volume.

In the year to date, the company has performed over 1,500 procedures and initiated six Senhance programs.

Now what

Asensus Surgical's systems are being installed in hospitals around the world at an increasing pace. Sadly, investors would probably be better off if the company stopped doing that.

ASXC Revenue (TTM) Chart

ASXC revenue (TTM) data by YCharts. TTM = trailing 12 months.

That's because the cost of goods sold still exceeds the amount of revenue the company is generating. This is usually what happens when a company has a product nobody really wants.

Asensus Surgical finished September with $118 million in cash after losing $46.6 million in the first nine months of the year. More system placements will most likely lead to further losses.

Chronically negative gross profit margins don't necessarily mean Asensus Surgical is offering huge incentives to install and use its surgical systems. Regardless of the reason for the chronic losses, it's probably a good idea to stay away from this stock until the company's operation can sustain itself.

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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