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Cutera, NetEase, West Pharmaceutical, IDEXX Laboratories and Align Tech highlighted as Zacks Bull and Bear of the Day

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·11-min read
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For Immediate Release

Chicago, IL – September 23, 2021 – Zacks Equity Research Shares of Cutera, Inc. CUTR as the Bull of the Day, NetEase, Inc. NTES as the Bear of the Day. In addition, Zacks Equity Research provides analysis on West Pharmaceutical Services, Inc. WST, IDEXX Laboratories, Inc. IDXX and Align Technology, Inc. ALGN.

Here is a synopsis of all five stocks:

Bull of the Day:

Cutera is a Zacks Rank #1 (Strong Buy) and its CoolGlide family of products has propelled it to some impressive growth and solid earnings. Let’s take a deeper look at this stock in this Bull of the Day article.

Description

Cutera Inc designs, develops, manufactures and markets the CoolGlide family of products for use in laser and other light-based aesthetic applications. The original CoolGlide CV provides permanent hair reduction on all skin types.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number. This tells me right away where the market’s expectations have been for the company and how management has communicated to the market. A stock that consistently beats has management communicating expectations to Wall Street that can be achieved. That is what you want to see.

For CUTR, I see a great history of beating the Zacks Consensus Estimate. There are four beats over the last four quarters.

The average positive earnings surprise over the last fours quarters works out to be 437%, which means the company is consistently posting triple and quadruple the Zacks Consensus Estimate

Earnings Estimates Revisions

The Zacks Rank tells us which stocks are seeing earnings estimates move higher. For CUTR, I see estimates moving higher.

Over the last 60 days, I see a few increases.

This quarter has moved from $0.09 to $0.08.

Next quarter has moved from $0.14 to $0.11.

The full-year number has increased from $0.33 to $0.58 over the last 60 days.

Next year is at $0.75 and that is up from $0.71 over the same time horizon.

Positive movement in earnings estimates like that is why this stock is a Zacks Rank #1 (Strong Buy).

Valuation

The valuation for CUTR is on the high end, but with growth like this you would expect investors to pay up. I see an 80x forward earnings multiple and sales growth in the most recent quarter coming in just over 122%. The price to book multiple of 15x is above the industry average of 11x. Price to sales comes in at 4.2x and again this is well below the industry average of 114x. 

Cantor Starts with Overweight

On June 2 Cantor Fitzgerald started coverage of CUTR with an Overweight rating and a price target of $55. They see topline growth driven by category leadership in body sculpting and acne, recurring revenues and broad industry tailwinds. The analyst also sees margin improvement over the next few years.

Bear of the Day:

NetEase is a Zacks Rank #5 (Strong Sell) despite beating the Zacks Consensus Estimate in the most recent quarter. Stocks that miss the number don’t always fall to a Zacks Rank #5 (Strong Sell) so let’s take a look at why that is the case in this Bear of the Day article.

Description

NetEase, Inc. is an Internet technology company engaged in the development of applications, services and other technologies for the Internet in China. It provides online gaming services that include in-house developed massively multi-player online role-playing games and licensed titles. NetEase, Inc.is based in Beijing, the People's Republic of China.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number. This tells me right away where the market’s expectations have been for the company and how management has communicated to the market. A stock that consistently beats has management communicating expectations to Wall Street that can be achieved. That is what you want to see.

In the case of NTES, I see one miss and three beats of the Zacks Consensus Estimate over the last year. This alone does not make the stock a Zacks Rank #1 (Strong Buy) and it doesn’t make it a Zacks Rank #5 (Strong Sell) either.

The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.

Earnings Estimates

The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower. For NTES I see estimates fluctuating.

This quarter has dipped from $0.74 to $0.73.

Next quarter has moved from $1.01 to $1.00 over the last 60 days.

The Zacks Rank is more heavily influenced by the move in the annual numbers, and the movement is negative for those numbers.

The 2021 consensus number has decreased from $3.58 to $3.36.

The 2022 number has moved from $4.56 to $3.98 over the last 60 days.

Negative movement in earnings estimates like that is why this stock is a Zacks Rank #5 (Strong Sell).

It should be noted that a majority of stocks in the Zacks universe are seeing positive earnings estimate revisions. That means that the stocks that are seeing small but negative earnings estimate revisions are falling to a Zacks Rank #5 (Strong Sell).

Additional content:

Bet on These 3 MedTech Growth Stocks for 2021 and Beyond

The economic mayhem brought on by the coronavirus pandemic is barely showing any signs of easing. After a few months of some stability in the first half of 2021, the surge in the highly-transmissible Delta variant is haunting investors.

Going by a Reuters report, the U.S. economic rebound has been impeded in the third quarter, partly because of the spread of the Delta variant. However, the growth outlook still stands at 4.2% for 2022 and 2.3% for 2023.

Meanwhile, despite several temporary phases of market recovery over the past couple of months, the pessimism across major pandemic-battered industries in the United States is still looming large.

Brighter Picture for MedTech

On Sep 9, the new mandate announced by President Joe Biden unveiled a series of steps to combat the rising pandemic concerns, including the announcement of a forthcoming federal rule that all businesses with 100 or more employees have to ensure that every worker is either vaccinated for COVID-19 or will have to submit weekly coronavirus testing results.

Once the rule is implemented, several MedTech stocks, particularly companies in the field of testing and vaccines, are expected to report robust business gains. Also, this rule is expected to ease away the Delta-induced fear in the economy, which might again increase hospital and physician office visits, boosting demand for non-COVID elective procedures.

Furthermore, a report by World Bank noted that the U.S. economy has been bolstered by massive fiscal support and growth is expected to reach 6.8% in 2021, the fastest pace since 1984.

MedTech: A Comparatively Safe Bet

While theories about the impending new waves of coronavirus are still looming large, the MedTech space is expected to remain resilient on the transformation of business models according to changing demand patterns, inclination toward digital healthcare and a number of fiscal stimulus packages that the government has introduced of late.

Despite the pandemic-induced crisis, many MedTech companies have raised their 2021 outlook on the rise in diagnostic testing demand.

In this line, Quest Diagnostics recently raised its full-year projection significantly. The company’s revenues for 2021 are now expected in the range of $9.84 billion to $10.09 billion versus the prior view of $9.54 billion to $9.79 billion.

Ideal Strategy for MedTech Investors

Amid the pandemic-induced market turmoil, when volatility peaks, it is always prudent to adopt a longer-term investing strategy and pick some growth-focused MedTech stocks which are fundamentally strong.

Once the pandemic fades, these stocks with a robust long-term growth potential along with strong and sustainable financial performance can be the best bets.

Here are a few MedTech companies with a Growth Score of A or B. Our research shows that stocks with a Growth Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy), offer the best upside potential. You can see the complete list of today’s Zacks #1 Rank stocks here.

3 Stocks to Bet On

West Pharmaceutical Services delivered robust performance in the second quarter of 2021 aided by solid organic sales growth in both of its base businesses and improving demand for products related to COVID-19 vaccines.  It continues to witness strong uptake of HVP components, which include Westar, FluroTec, Envision and NovaPure offerings, and Daikyo’s Crystal Zenith.

A raised financial outlook for 2021 instills further optimism in the stock. Net sales for full-year 2021 are projected between $2.76 billion and $2.79 billion (up from the prior range of $2.63-$2.65 billion), while adjusted earnings per share for 2021 are anticipated in the band of $8.05 to $8.20 (up from the previous range of $6.95-$7.10).

This Zacks Rank #1 stock has a Growth Score of B. The stock’s return on equity (ROE) stands at an impressive 28.6% versus the industry’s 14.1%. In 2021, the company’s earnings are expected to grow 72.7%. It has an expected long-term earnings growth rate of 27.3%.

IDEXX Laboratories' top line in the second quarter was driven by strong sales at the CAG, LPD and Water businesses. The company witnessed sturdy gains in CAG Diagnostics’ recurring revenues, supported by sustained strong global trends in pet healthcare. IDEXX, boosted by the ongoing business recovery and strong performance in the last-reported quarter, has raised its financial outlook for 2021.

The company currently projects revenue growth for the year in the range of 17-18.5% on a reported and 14.5-16% on an organic basis. Further, IDEXX projects full-year earnings per share growth of 22-25% on a reported basis.

This Zacks Rank #2 stock has a Growth Score of B. The stock’s Price/Sales ratio stands at 18.5% versus the industry’s 6.3%. In 2021, the company’s earnings are expected to grow 24.4%. It has an expected long-term earnings growth rate of 19.9%.

Align Technology exited the second quarter of 2021 with better-than-expected results despite the challenging business environment. Continued adoption of the company’s digital platform has also been a tailwind. The company is witnessing strong global growth in iTero business across all regions on the continued adoption of the iTero Element 5D Plus Series of next-generation scanners and imaging systems.

Align Technology, on the back of its impressive performance, has raised its financial outlook for 2021. The company now expects revenue growth for the year in the range of 56-60% from 2020. Further, it expects revenue growth in the second half of 2021 to exceed the mid-point of its long-term operating model target of 20% to 30%.

This Zacks Rank #2 stock has a Growth Score of A. The stock’s Price/Sales ratio stands at a very impressive 16.4% versus the industry’s 3.3%. In 2021, the company’s earnings are expected to grow 109.3%. It has an expected long-term earnings growth rate of 26.6%.

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Align Technology, Inc. (ALGN) : Free Stock Analysis Report
 
Cutera, Inc. (CUTR) : Free Stock Analysis Report
 
NetEase, Inc. (NTES) : Free Stock Analysis Report
 
IDEXX Laboratories, Inc. (IDXX) : Free Stock Analysis Report
 
West Pharmaceutical Services, Inc. (WST) : Free Stock Analysis Report
 
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