When public companies are discussed, it's often in the context of the share price. Even though market cap is a more helpful metric for determining the true cost of a stock, when it comes to buying and selling shares, the share price eventually has to be considered.
With the proliferation of fractional share availability at online brokers, share price is even less important than it used to be. But for those who do not yet have access to fractional shares, there are strong businesses with low share prices. Here are two companies with bright futures that can be bought for less than $55 each.
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1. Outset Medical
For patients who suffer from advanced kidney disease, the process of getting dialysis treatment is time-consuming and expensive. It is estimated that spending on the treatment of advanced kidney disease totals some $73 billion annually. Outset Medical (OM 0.84%) is trying to change how patients receive treatment with its dialysis device, Tablo. The Tablo device has already received FDA approval, is commercially available, and has already reduced intensive care unit (ICU) dialysis costs by 80%. Tablo can also be used by patients in their homes without the need for a medical professional.
For fiscal 2021, Outset recognized revenue of $103 million, an increase of 105% over 2020. Of that revenue, $84 million came from sale of the devices and related consumable items, and $18 million from service agreements and the cloud infrastructure subscriptions that allow doctors to monitor at-home patients' device use.
As Outset scales, the business is realizing some significant margin improvements. In 2021, gross profit increased 158% while the gross margin improved by 33.5 percentage points. Outset posted a net loss of $132 million, but that metric is improving. As a percentage of revenue, it was 128% as compared to 243% in 2020.
Outset is still a small company with a market capitalization of approximately $2.2 billion, and is guiding for full-year 2022 revenue growth of between 38% and 46%. The market seems to have priced in these expectations, and Outset's current price-to-sales (P/S) ratio is 20. That's not cheap, but it's also 34% lower than it was about a year ago.
Even with the current valuation, if the promise of the Tablo system pans out, Outset will look like a no-brainer investment in hindsight.
Image source: Getty Images.
2. Progyny
Progyny (PGNY -1.42%) wants a world where anyone who wants to have a child can do so. By offering a fertility and family-building benefits solution to large employers, Progyny helps thousands of people start families. Progyny's customers -- the companies that purchase its benefits solution -- are then able to offer a more valuable benefits package to their employees.
It seems like Progyny's offerings are catching on. The company ended 2021 with 191 clients, a 42% increase from the end of 2020. Additionally, more members are using the services Progyny provides. This is measured by the utilization rate, which was 1.3% in 2021, up from 1.16% in 2020. Investors obviously want to see the utilization continue to increase as that helps Progyny's clients see the value in its services.
The financial results have been strong as well. Revenue for 2021 grew 45% to $501 million, gross profit increased 60% to $112 million, and net income was $66 million, up 42% from 2020. Management is guiding for similar results, with revenue expected to grow between 35% and 39% in Q1 and between 46% and 55% for the year.
Progyny's stock has been a winner as well, trashing the S&P 500 by 166% since it came public in late 2019. The stock currently trades for 10 times sales, but it's putting up strong results and guiding for more of the same. Progyny estimates the market for fertility treatments in the United States was approximately $8 billion in 2019.
Progyny's 2021 revenue was $501 million, showing just how much potential is out there for its business. The strong results, healthy guidance for 2022, and potential market opportunity make Progyny a no-brainer buy for me.
