Non-fungible tokens (NFTs) are among the hottest of the ultra-speculative assets making the rounds in 2022. Everything from cartoon apes to social media posts can be minted and sold -- often to buyers with big expectations for the future value of their tokens.
As cool as NFTs are, they're among the riskiest assets on the market right now. For investors who are looking for a way to inject some growth into their portfolios, NFTs are obviously very tempting, but I have a proposal that might accomplish the same goal more effectively. And it's to buy shares of InMode (INMD -0.38%) instead of NFTs.
Why this stock is better than buying NFTs
InMode is an Israeli business that develops and sells devices for skin tightening, body contouring, and other applications in outpatient medical aesthetics. The hardware in its portfolio performs a smattering of different cosmetic interventions using radiofrequency radiation, including procedures that might typically require a specialized laser treatment or even plastic surgery.
In contrast to aesthetic surgeries, the company's equipment is far less invasive, which means that there's less friction for new customers. And it's even capable of increasing the effectiveness of traditional interventions like liposuction, an industry that is projected to have a global value of $1.2 billion by 2026, according to Grandview Research.
Per management, demand for cutting-edge aesthetic treatments with the company's devices is expanding over time as consumers eschew more invasive treatments like plastic surgery and as clinicians seek to offer a wider range of services. That means it'll sell more units and additional consumables like replacement handheld tool heads and adapters, which are required to administer certain treatments.
Per a report by JaguarAnalytics, InMode's total addressable market is in the ballpark of $3.5 billion, so there's plenty of room to grow its trailing revenue of $322.21 million. Furthermore, its sell-the-razor-and-the-blade business model guarantees that each new device installed at a clinic will bring in recurring revenue down the line from maintenance contracts and replacement parts.
In the past three years, InMode's business has exploded, with its quarterly revenue skyrocketing by 208.2% and its quarterly net income rising by 341.7%. Thanks to that stellar performance, the company has been able to increase its trailing research and development (R&D) spending by 105.9% in the same period.
That means there's an ever-increasing amount of work being done to develop newly capable systems and thereby increase its total addressable market. And that work is doubtlessly how management is confident that it'll continue to come out with a pair of new pieces of equipment every year moving forward.
To cap it off, InMode's profit margin of 46.06% is quite strong, and it only has $3.55 million in debt. There's nothing in the way of cranking future growth investment to 11. And that's one more reason why its stock has grown by more than 602% in the past three years.
It's practically on sale
If InMode's recent financial performance isn't enough to convince you that it's a better buy than an NFT, there's also its valuation to consider.
The trouble with NFTs is that it's remarkably difficult to assign them a value, as it's a highly subjective judgment, much like valuing pieces of fine art. What's more, NFTs themselves don't have any agency with which they might alter their own characteristics and thereby become more valuable. In other words, if you buy an NFT that other people don't regard as being valuable, the chances are slim that your fortunes will ever change.
Unlike with NFTs, you don't need to wonder if you're getting a good value for your dollar with InMode's shares, nor do you have to worry about whether management is capable of increasing the value of the company with fruitful investments in growth. The average price-to-earnings multiple of the medical devices industry is near 40, and InMode has a trailing P/E of 27.42.
InMode's shares are valued a bit lower than the average company in its industry, even though its growth potential is enormous. And thanks to the ongoing market correction, there's even a chance that InMode will be an even bigger bargain tomorrow than it is today.