1 Soaring Growth Stock That's Still an Unbeatable Bargain

Are you looking for underappreciated growth stocks that can deliver big gains? Try starting your search in the rapidly growing industry for minimally invasive cosmetic procedures.

The global market for noninvasive aesthetic treatments reached $61.2 billion in 2022 and is expected to grow by 15.4% annually through 2030. With minimally invasive skin-sculpting tools that produce results similar to liposuction, InMode (INMD -1.96%) is well positioned to ride this trend.

This medical device maker keeps reporting impressive growth on both its top and bottom lines, but the stock market hasn't seemed to notice. Right now, you can buy it at prices that look like an unbeatable bargain.

Another outstanding performance

Full-blown cosmetic surgery requires in-person meetings with doctors and surgeons, which just weren't possible during the COVID-19-related lockdowns. The pandemic pushed a lot of folks who would have opted for traditional liposuction toward practitioners with minimally invasive devices from InMode. For example, InMode's BodyTite device inserts a narrow probe under the skin, using proprietary radiofrequency technology to liquefy fat cells.

The pandemic-driven push toward less-complicated procedures has ended, but sales growth for InMode is still strong. The company reported first-quarter revenue that rose 23.5% year over year.

Providing cosmetic surgeons with new equipment is only part of InMode's business. Down the road, InMode will likely earn more by steadily selling consumable accessories that must be replaced between procedures.

First-quarter sales of consumables and services shot up 43% year over year. This suggests patients receiving treatment with one of InMode's devices are returning for more and telling their friends.

Gaining market share

In addition to its minimally invasive BodyTite device, InMode markets entirely noninvasive devices that smooth wrinkles. In this respect, InMode competes against injectables such as Botox from AbbVie, and it appears to be winning. In the first quarter, worldwide sales of Botox for cosmetic procedures rose just 2.9% year over year.

InMode's total sales expectation for 2023 is a significantly smaller sum than the revenue cosmetic Botox generates for AbbVie in a single quarter. In other words, there's plenty of room for InMode to grow.

It's easy to understand why people gravitate toward procedures performed with InMode's devices. The effects are more or less permanent, while Botox is famously temporary.

At the moment, InMode is mostly focused on cosmetic procedures, but it's expanding into health and wellness. For example, it recently launched an ophthalmology platform called Enision in Canada, and the company expects to launch this new platform in the U.S. this year.

A growing bottom line hardly anyone's noticed yet

Sales of InMode's devices and the accessories they consume during each procedure are rising fast along with the company's bottom line. According to generally accepted accounting practices (GAAP), first-quarter net income rose 31% year over year.

The large addressable market for minimally invasive cosmetic procedures is growing fast, and recent results show that this company's share is rising. You might expect the stock to trade at a really high earnings multiple, but it isn't. You can buy the stock now for just 16.8 times GAAP earnings from the trailing-12-month (TTM) period that ended March 31.

To illustrate just how deeply discounted InMode stock is right now, just look at the benchmark averages. The average stock in the S&P 500 index is trading at 22.6 times TTM earnings. InMode's recent market valuation is even lower than the average stock in the Dow Jones Industrial Average, currently trading at around 18.7 times earnings.

At its earnings low multiple, InMode stock can deliver long-term gains, even if earnings growth slows to a trickle. With a growing share of the huge market for minimally invasive cosmetic procedures, though, investors can reasonably expect earnings to grow by double-digit annual percentages for many years to come. Put it all together, and buying this stock right now makes a lot of sense.