SOURCE: MIMEDX GROUP.
What: MiMedx Group (MDXG 1.20%) 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.
