The broader market remains down for the year, but has it bottomed out? Nobody can say for sure. We know that a bull market will follow the downturn we are experiencing. Exercising patience amid these difficult times isn't easy, but history tells us that market recoveries are inevitable.
Once the market bounces back, those with skin in the game will benefit, provided they hold quality stocks. Let's examine two companies worth buying before the next bull market: Tandem Diabetes Care (TNDM +2.59%) and Block (SQ +3.74%).
1. Tandem Diabetes Care
As its name suggests, Tandem Diabetes Care focuses on the diabetes market. It develops devices to make the lives of patients suffering from this chronic illness easier. At the moment, Tandem's most important product is the t:slim X2 insulin pump. Sales of this product (and accessories) account for almost all of Tandem Diabetes' revenue.
Increased adoption of this innovative pump has helped the company increase its revenue, although its top-line growth rates have slowed recently. In the second quarter, Tandem Diabetes Care reported revenue of $200.3 million, an increase of 16% compared to the year-ago period. Tandem Diabetes Care isn't yet consistently profitable.
During the second quarter, the company's net loss came in at $15.1 million, compared to the net income of $4 million reported in the second quarter of 2021. Marketwide issues such as geopolitical tensions, declining growth rates, and red ink on the bottom line partly explain why Tandem Diabetes Care has underperformed in the market over the past year.
But there is hope, especially for patient investors, as the healthcare company's upside could be massive. First, consider that the diabetes market is (unfortunately) expanding. According to estimates, up to 33% of the U.S. population could be diabetic by 2050. That metric currently stands at about 11.3%.
Second, Tandem Diabetes' t:slim X2 is attractive to potential customers over alternatives because of its many advantages, including its relatively smaller size compared to other pumps.
NASDAQ: TNDM
Key Data Points
Further, few other pumps boast the ability to be combined with a continuous glucose monitoring system like DexCom's G6 to automate the insulin delivery mechanism completely. Tandem's t:slim X2 can do that task. And of course, insulin pumps tend to be perceived as being better than the other method of insulin delivery: multiple daily injections (MDIs).
About 50% of the company's customers switched from another insulin pump, while half of its type 1 diabetes patients switched from MDIs. Third, Tandem Diabetes still boasts substantial room to grow within its current target market that remains underpenetrated, as many diabetes patients with type 1 and type 2 (who need insulin) still rely on MDIs.
In the second quarter, Tandem Diabetes Care's installed base of more than 375,000 customers increased by 40% year over year. This number can still soar by leaps and bounds, along with Tandem Diabetes' revenue as it continues to expand its reach in this space. Doing so will help the company's stock start moving in the right direction again.
2. Block
Block, the company formerly known as Square, is a leader in the booming fintech industry. This space is projected to expand substantially in the coming years -- registering a compound annual growth rate of 26.2% through 2030, according to some estimates. Block's strategy for tapping into this growth is to expand access to many traditional financial services through the use of technology.
Consider the company's ambitions to address the unbanked and the underbanked partly through its peer-to-peer payment app, CashApp. How large is this target market? A study found that as of 2019, 6% of U.S. households had no bank accounts, and an additional 19% were underbanked. The problem is particularly pronounced in low-income and minority communities.
CashApp offers many typical perks of the financial services industry, including direct deposits, a debit card, stock trading services, a free tax preparation service, and cryptocurrency trading. Block also offers many services -- such as bank accounts, loans, and payroll -- to small businesses through its Square ecosystem.
As the company has argued, many of these perks have historically been difficult to obtain for small businesses.
NYSE: SQ
Key Data Points
Block has struggled in the stock market of late, partly because its Bitcoin revenue has dropped and has impacted overall top-line growth. Block's revenue declined by 6% year over year in the second quarter to $4.40 billion. Excluding Bitcoin revenue, the company's top line jumped by 34% year over year to $2.62 billion.
Even considering Block's crypto-related issues, the company continues to grow both its CashApp and Square ecosystems, leading to better results for both segments. Both Square and CashApp's gross profits grew by 29% year over year during the second quarter.
In the long run, extending valuable financial services to those who are struggling to access them, be it small businesses or individuals, is a strategy that should pay off hefty dividends for Block. That's why the stock still has plenty of room to run, and the future looks bright for the company.
