Cardiovascular Systems Grows On Domestic Sales Amid Margin Woe

On Feb 17, we issued an updated research report on Cardiovascular Systems, Inc. (NASDAQ:CSII) . The company has been pursuing product improvements, as well as evaluating new technologies in a bid to strengthen and broaden its portfolio of powerful micro-invasive tools. However, the cut-throat competition is a concern for the company. The stock currently carries a Zacks Rank #3 (Hold).

Over the past year, shares of Cardiovascular Systems have outperformed its industry. The stock has gained 31.7% compared with the industry’s 10.2% rise.

Cardiovascular Systems exited second-quarter fiscal 2020 on a mixed note, with a wider-than-expected loss, while revenues beat estimates.

On the positive side, with a 13.5% year-over-year increase in revenues, the fiscal second quarter marked the seventh consecutive quarter of double-digit revenue growth for the company. Top-line growth was driven primarily by strength in domestic atherectomy businesses, where the company is fast gaining market share. Further, the company registered strong double-digit unit growth in peripheral and coronary franchises.

Globally, Cardiovascular Systems registered a revenue jump of 30% in the coronary segment, whereas global peripheral revenues increased 8%. The Sapphire angioplasty balloons and Teleport Microcatheter once again registered strong customer adoptions.

Nitinol Coronary ViperWire has been well received in both Japan and the United States. In this regard, Cardio Vascular Systems is progressing well with its partnership with OrbusNeich, under which OrbusNeich is distributing the coronary and peripheral orbital atherectomy systems of the former in multiple countries outside the United States and Japan.

On the flip side, escalating costs and operating expenses are straining margins. In this regard, we note that Cardiovascular Systems bears a long history of incurring net losses since its inception.

Meanwhile, the company also faces stiff competition in the niche space. Furthermore, the company’s limitations to expand in the global market continue to restrict revenue generation.

Stocks Worth a Look

A few better-ranked stocks from the broader medical space are ResMed (NYSE:RMD) , Hill-Rom (NYSE:HRC) and Stryker (NYSE:SYK) . While ResMed sports a Zacks Rank #1 (Strong Buy), the other two carry a Zacks Rank of 2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hill-Rom has a projected long-term earnings growth rate of 11.1%.

Stryker has an expected long-term earnings growth rate of 9.9%.

ResMed has a long-term earnings growth rate of 11.9%.

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