Global Medical (GMED 1.79%) is a medical device stock that faced its fair share of challenges during the earlier days of the pandemic and is slowly recovering its business growth. In this segment of Backstage Pass, recorded on Dec. 1, Motley Fool.com contributors Brian Feroldi and Brian Withers discuss whether this is a good stock for long-term investors to consider buying right now.
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Brian Feroldi: Moving onto Globus Medical, ticker symbol GMED. For those that are unfamiliar, this is a company that makes products for people with musculoskeletal disorders. They have a legacy business that produces medical devices that are used by doctors. Stable, growing at a moderate pace. A few years ago, they got FDA approval for a robotic surgical system called the ExcelsiusGPS. That is the high-growth part of this business. It's got a core business that's growing slow and a fast-growing robotic surgery business. We saw basically that action happening in the third-quarter.
Total revenue grew 6% to $229 million. Not that big of an exciting number, but that was mostly due to a 7% decline in international sales. While that's a small piece of the revenue, that's a hard thing to overcome. The company's core musculoskeletal division only grew 1%. The third-quarter was a challenging quarter for a lot of companies that sell into hospitals because with COVID ramping backup, some stay-at-home measures were put back into place, et cetera. However, in their enabling technology business, that's the robotic surgery business, revenue grew 124% to $20 million. It's still a minority of revenue, but you can see it's growing pretty fast.
The rest of the income statement showed more promise. Gross margin ticked up 100 basis points to almost 75%. This is a high-gross margin business. One of the many reasons I like medical device companies, net income. Yes, income. This company is profitable, grew 7% to $47 million. EPS grew a little bit slower because the share count was up 4%.
Free cash flow of $60 million and this company has almost $1 billion dollars in cash, zero debt. Globus nailed down two regulatory approvals during the quarter for its ExcelsiusGPS system. Both of them are going to make the product even more useful and attractive to potential surgeons.
For the full-year management raised its revenue guidance to $950 million. That was about $70 million higher than its old forecast. It also raised its EPS guidance to about $2. If you look at the core of what the company is doing, it's growing its musculoskeletal business, albeit at a modest rate and it's growing its ExcelsiusGPS business at a much faster rate. If you want, dependable with a high-growth kicker as well as debt-free balance sheet, Globus Medical, GMED.
Brian Withers: There you go Brian. That's another great company and as Fool contributors, we're exposed to all of these recommendations. I looked back just at the companies we've covered on Beat and Raise in October and November, it's over 300 so [laughs] yeah. I looked in your portfolio and Globus isn't one of those companies that is in your portfolio. How do you decide of all of these companies, which ones that you're going to invest with your personal money?
Brian Feroldi: It depends on what type of investor you are after. I'm personally after low-risk, high-growth companies. So low-risk, high-growth. I think this company checks the first box for sure, it's lower risk, but it's not yet high-growth. I like to buy companies that are growing their revenue at least 20% per year.
In time, this company could actually get there if its ExcelsiusGPS system continues to grow and take over the total amount of revenue that this company gets in but I have nothing against this company. I think it's a very high-quality, overlooked stock. But in my portfolio, which by the way, I have like almost 80 companies in total, it just hasn't made that cut of being one of the ones that I've taken seriously about investing in. But if you're after slow and steady compounding, this is a fine company to look at.
Brian Withers: Yeah. I definitely love the cash flow and the balance sheet there. Great update Brian.
