Shares of InMode (INMD 0.70%), a medical technology company focused on the aesthetics industry, recently reached a new 52-week high in anticipation of the second-quarter earnings report the company announced on Thursday, July 27.
InMode's pre-earnings rally drove the stock's 12-month performance up past 65%. After climbing to such heights, plenty of investors are wondering if it might already be too late to buy the stock.
Here's a look at InMode's recent performance and its place in the aesthetics industry to see if investors can reasonably expect more upside ahead.
An outstanding quarter
InMode reported second-quarter sales that rose 20% year over year to $136 million. On the bottom line, earnings according to generally accepted accounting principles (GAAP) rose 25% year over year to $0.65 per share.
Investors were especially encouraged by sales of consumables and services that rose 44% year over year. That suggests its workstations are generating lots of business for the providers who installed them.
This year, InMode expects income from operations to rise 22% at the midpoint of management's guided range.
Reasons to buy InMode now and hold it
InMode's traditional laser and non-invasive platforms are still around, but these days 81% of its revenue comes from devices that perform minimally invasive treatments. For example, BodyTite produces results similar to liposuction by inserting one narrow probe below the skin's surface.
InMode still has a lot of room to grow. The global noninvasive aesthetic treatment market size was valued at $61.2 billion last year, and it's expected to grow by 15.4% annually through 2030, according to Grand View Research.
Fillers and Botox treatments are a big part of the noninvasive aesthetic treatment landscape, but InMode's rapidly gaining market share. AbbVie, which markets Botox and the Juvederm brand of fillers, recently reported second-quarter aesthetics sales that rose just 1% year over year.
The aesthetics industry is competitive but increasing recognition InMode's proprietary technology is a strong advantage. Brand recognition allowed the company to report an outstanding 84% gross profit margin in the second quarter, which was slightly better than it reported a year ago.
Image source: Getty Images.
A history of profitability has left InMode's balance sheet free of debt and flush with cash it will use to form new subsidiaries in Germany and Japan that can directly market InMode products in those regions. Less reliance on international distributors will more than likely boost profits over the long run.
InMode's opportunity in the aesthetics space is enormous, but this isn't the only lever it has to pull on. It turns out the company's medical technology can be used for more than just cosmetic procedures. During the second-quarter earnings call, management reported significant traction for its non-surgical eye-care platform in North America.
The Morpheus8 platform, which is used to tighten and remodel deep tissues, has several women's health applications. InMode is already upgrading the platform to expand its women's health industry footprint. Earlier this month, the company acquired a group of patents related to the treatment of urinary incontinence.
Still underappreciated
At recent prices, investors can buy shares of InMode for just 21.6 times the midpoint of management's adjusted earnings estimate for 2023. This forward price-to-earnings multiple is only slightly higher than the average stock in the S&P 500 index of the largest publicly traded companies.
With a recent market cap of just $3.7 billion, InMode is still a relatively small business rapidly gaining market share in the enormous aesthetics and women's health industries. I was a lot more excited to buy InMode at a lower earnings multiple late last year. Stil, this is a winning position that I'd consider buying again despite the higher price.
