What: MiMedx Group (NASDAQ:MDXG) reported fourth-quarter financials yesterday, and in the wake of a 13.8% gain since February 9, shares dropped by as much as 10% in early trading today.
So what: The maker of tissue grafts used to help wounds heal more quickly, and with less scarring, reported $51.8 million in fourth-quarter sales, up 30.9% year over year, and EPS of $0.12, $0.06 better than industry watcher guesses. Quarterly revenue improved over the third quarter's $49 million; however, the rate of growth slipped sequentially from the 46% year-over-year growth reported in the third quarter.
The company's full-year sales climbed 58.5%, to $187.3 million, and its EPS soared to $0.26 from $0.05 in 2014.
Overall, the results were at the high-end of MiMedx Group's previous fourth-quarter forecast for sales of between $49.5 million and $52.5 million, and full year sales of between $185 million and $188 million.
Now what: The bullish argument for owning shares in MiMedx Group is that a larger population of seniors, and a growing prevalence for diabetes, will lead to increased demand for tissue grafts.
Back in October, management indicated it was OK with Wall Street's projection for sales of $242 million in 2016, and in yesterday's report, it issued formal guidance for sales of between $260 million and $270 million this year. If it delivers on that prediction, then it expects EPS will be within a range of $0.33 and $0.37.
That guidance is roughly in line with the $262 million consensus sales estimate, and a fair bit better than their $0.28 EPS guess, so it would seem the sell-off earlier today is more profit-taking than anything else.
At 46, the company's trailing 12-month price-to-earnings ratio isn't cheap, and it's $844 million market cap appears to fairly value its expected sales this year. However, companies that are growing quickly on the top and bottom line typically demand a premium valuation. If you consider that MiMedx Group's forward P/E is a more reasonable 20, then selling shares in MiMedx Group could be premature. I think sales and profit will continue to grow; therefore, investors with an appetite for risk might want to give this company a look.
Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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