Nevro Corp.
NVRO
is well poised for growth in the coming quarters, backed by its solid foothold in the Spinal Cord Stimulation (“SCS”) market. A solid first-quarter 2022 performance, along with continued strength in its flagship Senza platform, is expected to contribute further. However, stiff competition and dependence on third-party payors persist.
Over the past year, this Zacks Rank #3 (Hold) stock has lost 75.7% compared with the 28.5% fall of the
industry
and 12.4% decline of the S&P 500.
The renowned global medical device company has a market capitalization of $1.53 billion. The company projects 32.6% growth for the next five years and expects to maintain its strong performance. Nevro’s earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters, missed the same in one and broke even in the other, the average earnings surprise being 5.8%.
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Let’s delve deeper.
Solid Foothold in SCS market:
Nevro’s foothold in the global SCS therapy business raises our optimism about the stock. The company, in March, announced that Noridian has released an update to its Local Coverage Billing and Coding article for spinal cord stimulators for chronic pain to include two new ICD-10 codes that cover Painful Diabetic Neuropathy (“PDN”).
In January, the company received the FDA’s approval for expanded labeling for its Senza SCS System associated with the treatment of non-surgical refractory back pain (“NSRBP”).
Strength in Senza:
We are optimistic about Nevro’s continued strength in its flagship Senza platform. Based on analysis from the company’s SENZA- Randomized Controlled Trial (“RCT”) and European studies, as well as the SENZA-PDN and SENZA-NSRBP RCTs, Nevro believes the 10 kHz therapy can be an attractive treatment option for patients. Due to the removal of paresthesia, the company believes that the 10 kHz therapy can also be effective for patients with chronic upper limb and neck pain.
Strong Q1 Results:
Nevro’s better-than-expected first-quarter 2022 results buoy optimism. The company recorded robust international revenues. Uptick in total U.S. permanent implant procedures and U.S. trial procedures are promising. Sequential improvement in U.S. PDN trial procedures is encouraging. Positive payer coverage progress from UnitedHealthcare and Noridian for high-frequency 10 kHz Therapy for the treatment of PDN raises optimism.
Downsides
Dependence on Third-Party Payors:
Nevro’s success in marketing its products largely depends on whether U.S. and international government health administrative authorities, private health insurers, and other organizations adequately cover and reimburse customers for the cost of its products. Access to adequate coverage and reimbursement for SCS procedures using Senza by third-party payors is essential for the acceptance of Nevro’s products by its customers.
Stiff Competition:
Nevro operates in a highly competitive medical device industry, which is subject to technological change. The company’s success depends partly upon its ability to establish a competitive position in the neuromodulation market by securing broad market acceptance of its HF10 therapy and Senza products for the treatment of approved chronic pain conditions. Any product developed by Nevro that achieves regulatory clearance or approval will have to compete for market acceptance and market share.
Estimate Trend
Nevro witnessed a positive estimate revision trend for 2022. In the past 90 days, the Zacks Consensus Estimate for its loss per share has narrowed from $2.92 to $2.90.
The Zacks Consensus Estimate for the company’s second-quarter 2022 revenues is pegged at $104.7 million, suggesting a 2.3% improvement from the year-ago quarter’s reported number.
Key Picks
Some better-ranked stocks in the broader medical space are
AMN Healthcare Services, Inc.
AMN
,
Omnicell, Inc.
OMCL
and
Masimo Corporation
MASI
.
AMN Healthcare, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 1.1%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 15.6%.
You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AMN Healthcare has gained 10.2% against the
industry
’s 53.8% fall in the past year.
Omnicell, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 20%. OMCL’s earnings surpassed estimates in three of the trailing four quarters and missed the same in the other, the average beat being 13.4%.
Omnicell has lost 24.3% compared with the
industry
’s 59.2% fall over the past year.
Masimo, carrying a Zacks Rank #2 at present, has an earnings yield of 3.6% against the industry’s negative yield. MASI’s earnings surpassed estimates in the trailing four quarters, the average beat being 4.4%.
Masimo has lost 47.1% compared with the industry’s 28.5% fall over the past year.
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