STAAR Surgical Company: A Prima Vista Play
We are all aging…so why not try to make money from it? Yes, the world’s population is rapidly aging. The good news is that this will translate into strong tailwinds for healthcare products and services. Take the case of STAAR Surgical Company (NASDAQ:STAA).
The Company develops and manufactures minimally invasive visual implants and other ophthalmic products to improve or correct the vision of patients with cataracts and refractive conditions and distributes them worldwide.
The rapidly growing company develops implantable lenses that are generally in demand by those over 60 years of age. Given the large aging population, STAAR Surgical has great upside to reap the gains.
The chart shows STAA stock launching an impressive V-shaped rally from $23.20 during the March sell-off to above its pre-COVID-19 high.
STAAR Surgical stock traded at a record 52-week high of $62.51 in July prior to a small retrenchment, but the stock is rallying to its 50-day moving average. This is supported by a rising relative strength index and a moving average convergence/divergence (MACD) buy.
Impressive Fundamentals Make a Bull Case for STAA Stock
STAAR Surgical Corporation has so far demonstrated a good history of fundamental growth across the board, from revenues to free cash flow (FCF).
Revenues have risen in each of the last five years to a record $150.2 million in 2019, nearly doubling in that span
But, STAAR Surgical is expected to see a lag this year given the uncertainties of the pandemic when it comes to its global operations.
STAA is expected to see revenues rise only four percent to $156.2 million this year prior to staging a strong 31.6% bounce to $205.6 million in 2021. (Source: “STAAR Surgical Corporation (STAA),” Yahoo! Finance, last accessed September 29th, 2020.)
At the same time, STAAR Surgical delivered positive earnings before interest, taxes, depreciation, and amortization (EBITDA) and profits based on generally accepted accounting principles (GAAP) in 2018 and 2019.
Both the EBITDA and earnings growth were well ahead of revenue growth from 2017 to 2019.
But as with revenues, STAA is estimated to see earnings fall to $0.05 per diluted share this year, then rally to $0.46 and as high as $0.77 per diluted share in 2021. There is a low estimate of $0.33 per diluted share for 2021. (Source: Yahoo! Finance, op. cit.)
STAAR Surgical has significantly improved FCF in each of the last five years. STAA turned positive FCF from 2017 to 2019.
Bottom Line
The consensus among analysts is that STAAR Surgical Company (STAA) is a Buy stock at the moment, with a recommendation rating of 1.4. None of the analysts rate the stock as a Sell, while none rate it as Overweight. 1 out of 7 have rated it as a Hold, with 6 advising it as a Buy. None have rated the stock as Underweight. The expected earnings per share for the stock is $0.03.
Wall Street analysts have a consensus price target for the stock at $64.6, which means that the shares’ value could jump 14.6% from current levels. The projected low price target is $63 while the price target rests at a high of $70. In that case, then, we find that the current price level is 24.2% off the targeted high while a low case would see the stock rise 11.8% from current levels.