Do you like stocks with triple-digit revenue growth? Here are three companies you might want to dig into.
First up is Outset Medical (OM 3.11%), a healthcare company that doubled its sales last year. The next one is Aurinia Pharmaceuticals (AUPH 3.74%); analysts are estimating its revenue will triple in 2022. Then there's Shockwave Medical (SWAV 0.45%), whose sales jumped 270% in its most recent quarter. Here's why three Fool.com contributors are bullish on these names.
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Multiple tailwinds will keep this one flying
Patrick Bafuma (Outset Medical): When you hear about a company's triple-digit revenue growth, it's natural to to wonder about its sustainability. Fortunately, dialysis innovator Outset Medical has massive tailwinds that should keep the sales coming for years to come. After posting a 105.5% year-over-year increase in fiscal-year 2021 revenue to the tune of $102.6 million, the company is looking to continue to expand its footprint with its innovative dialysis system, Tablo.
This healthcare company participates in two markets: in-hospital dialysis and at-home dialysis. These are $2.5 billion and $8.9 billion addressable markets, respectively. There is good reason to believe Outset should be able to gain considerable ground in both markets in the coming years. First, it already has signed agreements with seven of the eight largest health systems and a third of the 100 largest regional health systems to deliver its system. And by demonstrating a 55% cost savings for one hospital system along with greater than 95% treatment success rates, it's easy to envision Tablo continuing to increase its in-hospital presence.
Secondly, in the larger home dialysis market, this healthcare newcomer believes the ease of use for Tablo will convert more patients to home dialysis. And, as only 2% of dialysis patients are on home therapy, there is quite a ways to grow in the $8.9 billion addressable home market. Compared to traditional home systems, Tablo users require less training, fewer treatments per week, and need to spend less time setting up for treatment. It's no wonder the Centers for Medicare and Medicaid Services (CMS) named the Outset Medical system a substantial clinical improvement over current home hemodialysis devices. Not to mention CMS is giving a small financial incentive for healthcare providers to start patients on home treatments. The company is just getting started, hoping to have 100 units in homes by the end of 2022, yet there were just over 59,000 home-dialysis patients in 2019. With plenty of room for growth, cost savings for hospitals, financial nudges from Uncle Sam, and a better patient experience, this all adds up to continued heady growth for years to come.
A waiting game
George Budwell (Aurinia Pharmaceuticals): Aurinia Pharmaceuticals has fallen on tough times in 2022. The autoimmune disease specialist's shares have lost a staggering 55% of their value so far this year, and are currently trading at a whopping 99% discount relative to their all-time highs.
But there is a stark counterpoint to Aurinia's dreadful stock performance. Namely, the company's oral lupus nephritis (LN) medication Lupkynis (voclosporin) is on track to post fairly respectable sales figures this year and beyond.
Aurinia's management expects the drug to rake in between $115 million and $135 million in 2022. On the low side of this revenue forecast, the biotech's sales ought to rise by at least 155% over last year's haul. Longer term, Wall Street expects Lupkynis to hit an eye-popping $2 billion in annual sales by the end of the decade. That's an enormous revenue projection for a company with a current enterprise value of approximately $1 billion.
So why is Aurinia's stock headed in the wrong direction? Two issues are at play here. First up, Aurinia was widely expected to be a red-hot takeover target following Lupkynis' approval in 2021. Thus far, that particular investing thesis has yet to come to fruition. Investors hoping for a quick gain, in turn, have apparently lost patience and moved on to greener pastures.
Second, the drug's first-year sales have been hampered by logistical issues stemming from the pandemic. Wall Street was expecting the drug to be gobbling up market share during its second full year on the market. Unfortunately, Aurinia's initial 2022 sales forecast was more than a little underwhelming, causing some growth investors to throw in the towel.
Is Aurinia a worthwhile buy on this weakness? Aurinia's stock ought to eventually rebound. Lupkynis fills a clear-cut need in a sizable marketplace. However, investors shouldn't expect a quick turnaround. Like most early commercial-stage biotechs, Aurinia is fighting against a wave of negative sentiment right now. As such, this stock is arguably best suited to investors willing to buy and hold for the long term.
Shockwave is flying high
Taylor Carmichael (Shockwave Medical): Shockwave is seeing massive growth right now. The medtech pioneer has a minimally invasive platform for treatment of calcified plaques in arteries. Using introvascular lithotripsy (IVL), Shockwave's devices produce sonic pressure waves that destroy calcium deposits without any harm to soft tissue.
What's cool about Shockwave is that investors can expect a lot of recurring revenue as the company's platform becomes the standard treatment for calcified arteries. Right now the company is still placing its devices in hospitals around the world. Shockwave had $237 million in sales last year, up 250% from 2020. Revenue spiked even higher in the fourth quarter, up 271% from a year ago.
This is remarkable given the disruptions caused by COVID-19 last year. The company is guiding conservatively for 2022, projecting revenue growth from 71% to 79% for the year. I believe that's conservative. One factoid that jumped out from me on the earnings call was that Medicare changed its payment for Shockwave's devices in 2022, essentially doubling the payout to hospitals using the device. This is a validation of the company's platform and ultimately a financial boon for Shockwave as more and more hospitals will opt for IVL to treat calcified deposits in arteries.
The stock has gotten cheaper over the last year, with the price-to-sales ratio dropping from 76 in June to 22 now. The market is still pricing this stock for fantastic growth going forward. With a $5 billion market cap, Shockwave has plenty of room to run a lot higher.
