As a medical equipment company focused on developing innovative devices to perform aesthetic procedures, InMode (INMD -2.48%) has a lot to offer investors.
With its snappy revenue growth, robust profitability, and consistent investment in research and development, there are many factors supporting its long-term performance -- and that's been true for quite some time. Over the last 12 months, its shares have risen by 13.7%, topping the market's increase of 10.4%.
But how much money would shareholders have made if they invested even further back, and what are the company's chances of replicating its run-up to the present? Let's crunch a few numbers and examine its business model to find out why it's successful.
Pricing means it won't be hard to repeat success
When it comes to cosmetic medical procedures, people only have a few options. One path is plastic surgery, which is highly effective, but it's invasive and can cost upward of $5,000 per procedure.
Another avenue is less-invasive techniques like laser treatments, which can cost around $2,500 per treatment, but aren't always on par with surgery in terms of the results. Plus, many procedures aren't possible with laser treatments, which limits their usefulness.
There is one more option. InMode's specialty is less-invasive radiofrequency devices that are inexpensive and deliver surgery-like results for patients. The company makes a variety of machines with services including body remodeling, skin tightening, and even muscle toning. InMode's devices punch above their price point when it comes to convenience and efficacy, which is a competitive advantage. A full course of treatment with its Morpheus skin remodeling device can cost as little as $2,250 and patients don't require any downtime afterward.
That's why it's not surprising that its twelve-month trailing revenue has increased by more than 225% since 2019, reaching $357.5 million. And, its quarterly net income has grown by more than 420% in the last three years.
Holding this stock has paid off handsomely
But how much did that hot run of growth end up helping shareholders who started a position in early 2020?
At the very start of 2020, shares of InMode were going for near $21. Now, they're close to $40.5, which means investors from early 2020 would be up by around 104%. If you'd bought $5,000 worth of shares, you'd currently have roughly $10,200. That's not half bad, considering that the market's total return in that period was only 35.3%.
But if you had sold your shares when InMode's stock was at its height near $95 in early October 2021, you'd have made an even more impressive sum of $20,100.
There's a good chance that the company will return to that price level over the next couple of years. In fact, the average of four price estimates made by professional analysts who routinely cover the stock is $82.7. So if the company continues to expand at its present rate, its stock price could shoot to new highs, rewarding investors who held the stock through its recent downturn.
More growth is on the way
Looking into the future, InMode is in a position to keep flourishing. Though its shares are down by more than 43.3% this year, it has a few growth drivers that should perk things up quite quickly.
The company is expanding into international markets, 17 of which it entered for the first time in 2021. And it'll continue to expand its portfolio of devices so it can steal market share from traditional plastic surgery and laser treatments. Furthermore, InMode will also keep developing and selling new consumables like replacement handpieces for its equipment, as its business uses a razor-and-blade model.
In terms of the scope of its research and development (R&D) work on new hardware, investors will be pleased to hear that annual R&D expenditures have increased by 67.2% since January 2020, reaching $9.5 million for 2021. At the same time, R&D costs have decreased as a percentage of annual revenue, which means that new device development can sustainably proceed at the current pace. Management thinks that pace is sufficient to continue launching two new pieces of equipment per year.
Financially, there's little standing in the company's way. Its debt of $4.5 million is negligible, and it has $415.9 million in cash to fuel its efforts.
So if you don't want to miss out on the next leg of this company's growth, it might be a good idea to consider an investment. There's no guarantee that the stock will repeat its run-up over the last few years, but it's entirely possible that it'll keep outperforming the market given its business fundamentals.