InMode (INMD -0.63%) is a medical device company that provides its consumers with a wide range of treatments to help with contouring skin, treating acne, removing hair, and other aesthetic issues. The company's focus is on giving young people an alternative to plastic surgery. It has operations in 80 countries, and sales outside of the U.S. make up one-third of its revenue.
Shares of the healthcare stock have been rising in recent months, but on a year-to-date basis, they are still down around 50%. Is the stock destined to continue rallying, or is it likely to give back some of its recent gains?
InMode's recent results show lots of promise
InMode operates in an area of healthcare -- aesthetics -- that is proving to be strong amid inflation; in its most recent quarter (the period ended Sept. 30), the company reported revenue of $121.1 million, which was up 29% year over year. Revenue has been stable of late, but investors may be concerned about the steep drop-off from the growth the company achieved in 2021, when sales soared by 70% :
INMD revenue (quarterly YOY growth); data by YCharts. YOY = year over year.
A slowing growth rate isn't unexpected, especially with a recession potentially around the corner and consumers being more price-conscious. But achieving 29% growth on top of already impressive prior-year results is still encouraging.
For the full year, the company is projecting revenue between $445 million and $450 million. Last year, its sales hit just under $358 million. What's particularly attractive about the business is that it also generates some incredibly strong margins and has plenty of room to absorb rising costs:
INMD gross profit margin (quarterly); data by YCharts.
Strong margins and continued sales growth are a great recipe for success and can make the stock look like a bargain in the future.
Does the stock offer investors good value today?
A concern investors may have about InMode is whether it's too late to buy the stock. Shares have been surging for several months, and it is no longer near its 52-week low of $20.60. Investors may be discouraged that the low has passed, but the stock is by no means overpriced; the price-to-earnings (P/E) multiple of 17 is around where it was before the pandemic. And that's also well below the healthcare average of 22.
INMD PE ratio; data by YCharts.
Should you buy InMode's stock?
There's a lot to like about InMode's business and global reach, as there's definitely significant potential for the business, in the long run, to continue expanding its operations. Given its growth opportunities and high profit margins, InMode could look incredibly cheap in a few years. For long-term investors, it's easy to justify buying shares of the healthcare company right now.
