ABMD Stock Forecast: ABMD Is Up More Than 94% In a Year

Viktoria VoronchukThis ABMD stock prediction article was written by Viktoriya Voronchuk – Financial Analyst intern I Know First.

Highlights:

  • Since the beginning of 2020, the company’s share has risen by 94%.
  • The revenue growth is forecasted to 16.3% per year – faster than the US market.
  • The DCF analysis shows that the ABMD stock forecast should be around $399.63.

Overview

(Source: www.abiomed.com)

Abiomed, Inc. engages in the research, development, and sale of medical devices to assist or replace the pumping function of the failing heart. It also provides a continuum of care to heart failure patients. The company offers Impella 2.5 catheter, a percutaneous micro heart pump with integrated motor and sensors for use in interventional cardiology; and Impella CP, a device used by interventional cardiologists to support patients in the cath lab and cardiac surgeons in the heart surgery suite.  It sells its products through direct sales and clinical support personnel in the United States, Canada, Europe, and Asia. The company was founded in 1981 and is headquartered in Danvers, Massachusetts.

CHF Treatment Devices Market & ABMD: CAGR is Expected to be 8.1% Over the Forecast Period

Most compelling evidence of future ABMD’s growth – the role of the company on the market. Consider the global market for devices for the treatment of congestive heart failure. Based on www.grandviewresearch.com, the global congestive heart failure treatment devices market size was estimated at $23.5 billion in 2020. CAGR is expected to be 8.1% over the forecast period. According to ourworldindata.org, cardiovascular diseases have the highest percentage of all diseases in the world (17.65%). The growing burden of cardiovascular disease is one of the main factors responsible for the CHF device market’s lucrative growth.

(Figure 1 – Global congestive heart failure treatment devices market, by product- Source: www.grandviewresearch.com)

Successful Treatment from Abiomed

Abiomed announced the successful treatment of the world’s first two patients with a compact heart-lung machine. Full commercial availability in the US is expected in 2021. This system is an important addition to Abiomed’s solid and innovative portfolio of heart and lung recovery. It is worth noting that patients with cardiogenic shock or other heart disease had an 83.6% survival rate when using Impella 5.5, including 76.1% who regained natural heart function. These are reasons for the growth of the company’s shares and the increase in demand for it.

(Figure 2 –Source: www.abiomed.com)

It can be concluded that due to the high number of heart diseases worldwide, the world market for devices for the treatment of congestive heart failure has development prospects. The devices that Abiomed produces will be in demand over the next few years. This allows me to stick with the buy position of the stock.

Abiomed Financial overview: ABMD Is Up More Than 94% In a Year

Despite the COVID-19, ABMD has optimistic future growth. Since the beginning of 2020, the company’s share has increased by 94%. Figure 1 shows that, currently, the long-term moving average is above the short-term moving average.

(Figure 3 – Source: www. finance.yahoo.com)

Another key point – ABMD’s Financial Position. ABMD’s short term assets exceed its short term liabilities by $611.41M and ABMD’s short term assets exceed its long term liabilities by $571M. It indicates that the company is in good financial health and is less likely to face financial hardships.

(Figure 4 – Source: www.simplywall.st)

Significantly to see what the company has with ROE and ROA indicators. Аs can be seen, ROE and ROA  show a downward trend for 2020. Of course, this can prick up investor’s ears. Don’t forget about the impact of COVID-19. The revenues, operating profit, and operating cash flows for the first quarter of FY 2021 will be materially adversely impacted due to the pandemic. But the company is on the road to recovery in 2021.

(Figure 5 – Source: www.finance.yahoo.com)

It is important for investors the company’s debt-to-equity position. ABMD is debt-free. ABMD has not had any debt for the past 5 years, therefore it does not need to be covered by operating cash flow.

(Figure 6 – Source: www. simplywall.st)

It can be concluded that despite the decrease in the number of company operations performed during the pandemic, the company has a high financial performance. ABMD’s short term assets exceed its short and long term liabilities. The company has not had any debt for the past 5 years. It allows me to conclude the company’s positive future growth and the purchase of shares.

ABMD’s Revenue Growth by 16.3% Per Year is Forecasted in Comparison to the US Market

Abiomed and its competitors are large-cap medical companies. We will compare companies based on their profitability, earnings, valuation, and risk. Figure 5 shows that the company has a higher ROA and ROE than Insulet and almost the same as Masimo. The percentage of net income generated from a company’s revenue is 11.76 times greater than Insulet and 1.27 times greater than Masimo.

(Figure 7 – Profitability of Abiomed and Competitors 2020: Source: www.marketbeat.com)

Even though the revenue is less than Masimo’s, earnings per share are 17.5 times greater than Insulet and 1.47 times greater than Masimo’s. It is a positive sign, and it means the company is making good growth.

(Figure 8 – Valuation and earning of Abiomed and Competitors 2020: Source: www.marketbeat.com)

In the meantime, we should see the picture with beta. Beta offers investors a good indication of an issue’s volatility relative to the overall stock market. Insulet has a beta of 0.73, meaning that its share price is 27% less volatile than the S&P 500. Simultaneously, Masimo has a beta of 0.87, suggesting that its stock price is 13% less volatile than the S&P 500. Abiomed has a beta of 1.36, suggesting that its share price is 36% more volatile than the S&P 500. It means ABMD’s stock would move 36% more than competitors’ shares.

What about Future Growth Forecasts? According to www.simplywall.st, ABMD’s earnings have grown significantly by 27.4% per year over the past 5 years. ABMD’s revenue of 16.3% per year is forecasted to grow faster than the US market (10.1% per year). ABMD’s earnings are expected to grow by 13.6% per year.

(Figure 9 – Past 5 Years Annual Earnings Growth and Analyst Future Growth Forecasts of Abiomed and Competitors 2020: Source: www.simplywall.st)

To summarize, I can conclude that Abiomed has high results in comparison to its competitors in terms of net margin, earnings per share, and annual earnings growth, ROE, ROA. ABMD’s stock could move 36% more than competitors’ shares, earnings are expected to grow by 13.6% per year.

DCF Supports $ 399.63 ABMD Stock Forecast for 2021

The forecast is based on average data from previous years, the direction of the company’s policy, and the specifics of the development of this sector of the economy for the coming years. Future cash flows are projected based on historical data combined with a forecast for the next 4 years. The DCF analysis results show that ABMD’s stock target price should be around $399.63.  This projected share price makes $75.43 more difference from the current share price.

(Figure 10 – Calculation of the DCF model)

Conclusion

I take the buy-side on ABMD’s stock because stock holds buy signals from both short and long-term moving averages giving a positive forecast. ABMD shares are up more than 94% since the beginning of 2020. ABMD’s short term assets exceed its short-term and long-term liabilities. The company has not had any debt for the past 5 years. ABMD’s stock would move 36% more than competitors’ shares, earnings are expected to grow by 13.6% per year. The devices that Abiomed produces will be in demand over the next few years. Therefore, I consider it a good choice at these current levels, and according to the DCF analysis results, the ABMD stock forecast target price should be $75.43 more and will be around $399.63.

It is worth paying attention that the stock-picking AI of I Know First has a high signal on the one-year market trend forecasts, supporting my position for the ABMD stock forecast. The light green for the short-term forecasts is mildly bullish, while the darker green is a strong bullish signal for the one-year forecast.

Past Success With ABMD Stock Prediction

I Know First has been bullish with its ABMD in the past. On May 17, 2020, the I Know First algorithm issued a bullish forecast for ABMD stock price and recommended ABMD as one of the best consumer stocks to buy. The AI-driven ABMD stock forecast prediction was successful on a three-month horizon resulting in more than 69,37% gain since the forecast date. See the chart below.

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Please note-for trading decisions use the most recent forecast.