What happened

Shares of medical device company InMode (INMD 0.22%) jumped 48.3% in July, according to data provided by S&P Global Market Intelligence. The stock performed mostly in line with the S&P 500 during the month with the exception of two monster days. The first came midway through July when InMode reported preliminary financial results for the second quarter of 2022. The second came at the end of the month when the company reported official Q2 numbers.

So what

InMode sells radio-frequency medical devices used by professionals including cosmetic surgeons and dermatologists. The company went public in 2019 and its devices are gaining in popularity. The year it went public, it generated just $156 million in revenue. In 2021, it generated $357 million -- 129% growth in just two years.

Going into July, InMode was guiding for full-year revenue of $415 million to $425 million, 16% to 19% year-over-year revenue growth. Management didn't give Q2 guidance, but results must have been coming in hotter than it expected. On July 12, the company released preliminary Q2 results and raised its full-year guidance to $425 million-$435 million at that time.

InMode stock soared with preliminary Q2 numbers. However, just two weeks later official results were even better than expected. Management had expected $113.3 million at most in Q2 but it reported $113.5 million. While this is a small difference, this pleasant surprise was enough to make InMode stock jump yet again.

On a related note, InMode stock's valuation had fallen to an extremely cheap level in 2022. At its recent low point, the stock traded at a price-to-earnings (P/E) ratio of less than 11, which is cheap for a company's whose top line is growing by double digits. This low valuation implies that investors were somewhat bearish about InMode's prospects in 2022 coming off of such extreme growth over the past two years. But with Q2 numbers, some of those bearish doubts are being put to rest.

INMD PE Ratio Chart

INMD PE Ratio data by YCharts

Now what

Indeed, there is reason for long-term optimism for InMode's business. Consider that there are now over 14,000 InMode devices installed. If these are in high use, then it's reasonable to assume that InMode will be able to keep selling devices to new customers. And it believes there are potentially over 200,000 medical professionals worldwide that might use its products.

Imbedded within InMode's Q2 results is an encouraging sign in this regard. The company's consumable revenue is generated with device usage. And in Q2, consumable revenue was up 59% year over year, outpacing overall revenue growth. This revenue segment isn't as profitable as InMode's medical devices. However, it does suggest its installed devices are being used frequently. And this provides hope that InMode still has plenty of room to keep selling devices to new customers in 2022 and beyond.