Abbott Laboratories (ABT 0.25%) has been a disappointing investment in recent years. While COVID-19 testing gave the business a boost, this has largely been a slow-growing company. And since 2020, the stock is up only 11%, as it offered little to investors beyond just safety and a modest dividend. However, the company's growth prospects could soon get an upgrade, as Abbott Laboratories is looking to offer a product that may appeal to healthy people.
Lingo could be a huge growth catalyst for Abbott
Abbott Laboratories plans to file for approval from the U.S. Food and Drug Administration for a new device, Lingo, which could open up some exciting opportunities for the business. Lingo is a wearable device that tracks glucose levels, and it can also work with an app to give people personalized recommendations related to diet and exercise.
CEO Robert Ford sees this as an opportunity to be proactive and market not only to people who already have health issues, but to those who want to get preventative care and stay on top of their health: "We're going to continue to solve medical problems, but I think we also need to look at the healthy that want to stay healthy and develop products and solutions and services for them."
The device is already available in the U.K., and Ford said he is hopeful that it may appear on the U.S. market as early as next year.
NYSE: ABT
Key Data Points
Diabetes care is a big part of Abbott's current growth
The company already makes continuous glucose monitoring (CGM) devices, and they are a big reason why Abbott's medical device segment has been doing so well. On Oct. 18, the healthcare company released results from its third quarter (which ended on Sept. 30), and revenue of $10.1 billion was down 3% year over year as demand for COVID-19 testing dropped significantly. Diagnostics revenue declined by 33% year over year.
But medical devices are an encouraging area for the business, as they generated $4.2 billion in revenue in Q3 and rose at a rate of 17% year over year. Within that segment, in diabetes care, its FreeStyle Libre CGM devices brought in $1.4 billion, rising at a rapid rate of 31% year over year.
Despite the rise in interest in weight-loss drugs, including Wegovy, the company says that even as people have been using glucagon-like peptide 1 (GLP-1) drugs to lose weight, that hasn't led to a decline in the number of FreeStyle Libre users. In fact, the use of the CGMs and the use of GLP-1 drugs appear to go hand in hand.
By adding another product into the mix and with Lingo providing a potentially more comprehensive healthcare option, and targeting people who don't have diabetes, Abbott's business could be in much better shape moving forward.
Should you buy Abbott Laboratories stock?
Year to date, shares of Abbott Laboratories are down 12%. At 2.1%, the stock does offer a modest dividend yield. But with the business slowing down due to a drop in COVID-19 testing demand, it is increasingly difficult for investors to justify paying a multiple of 33 times earnings for the business. In comparison, the average healthcare stock trades at a multiple of less than 26.
But if Lingo is successful in winning over non-diabetic customers, it could quickly lead to some stronger revenue growth in the future for Abbott Laboratories. Investors who are willing to remain patient with the business should consider buying the healthcare stock, as Abbott Laboratories can leverage its dominance in medical devices to help unlock more growth in the long run.
