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On Thursday, B.Riley initiated coverage on Tactile Systems Technology (NASDAQ: NASDAQ:TCMD) with a positive outlook, assigning a Buy rating and setting a price target of $23.00. The firm highlighted the medical technology company's focus on margin expansion through technology and workflow enhancements, as well as the potential for new product launches and the development of clinical evidence.
Tactile Systems Technology, which specializes in compression garments for the treatment of various medical conditions, including lymphedema and bronchiectasis, has shown a notable increase in sales and adjusted EBITDA. In the second quarter of 2024, the company reported a 7% year-over-year increase in sales and a 49% rise in adjusted EBITDA. Additionally, Tactile Systems generated $13 million in operating cash flow during this period.
Despite these positive financial results, B.Riley pointed out that Tactile Systems' stock is currently trading at multiples that are lower than the average of its peers. The stock trades at 1.0x enterprise value to sales (EV/sales) and 8.4x enterprise value to EBITDA (EV/EBITDA), compared to peer group averages of 2.4x and 11.7x, respectively.
The firm's analysis suggests that the market has not fully recognized the potential for margin improvement at Tactile Systems. The company's efforts to streamline operations and introduce next-generation products are expected to contribute to its growth and financial performance.
B.Riley's price target of $23.00 reflects confidence in Tactile Systems' strategy and its ability to execute on plans to enhance its margin profile. The firm believes that as the company continues to make progress, its valuation will adjust to more accurately reflect its improved fundamentals and growth prospects.
In other recent news, Tactile Systems Technology has seen a variety of developments. The company's second quarter of 2024 saw a 7% year-over-year increase in total revenue, which reached $73.2 million. Revenues from the Lymphedema and Airway Clearance product lines also saw increases of 8% and 2%, respectively.
However, reflecting stricter Medicare documentation requirements, the company revised its full-year 2024 revenue guidance to a range of $293 million to $298 million.
In addition, Tactile's latest product, Nimbl, received approval for Medicare billing, marking a significant step for the company in providing advanced therapeutic options for home-based care for chronic conditions. The device, which integrates with the Kylee™ digital app, is designed for the treatment of lymphedema, chronic edema, venous insufficiency, and wound healing.
Furthermore, despite the company's challenges with Medicare, BTIG maintained its Buy rating on Tactile Systems Technology, with a steady price target of $16.00. BTIG suggests that any positive developments could favorably impact the company's performance. Lastly, Tactile Systems is progressing with technology investments and plans to deploy an e-prescribing tool later this year.
InvestingPro Insights
Recent data from InvestingPro aligns with B.Riley's optimistic outlook on Tactile Systems Technology (NASDAQ: TCMD). With a market capitalization of $333.14 million and a strong gross profit margin of 72.07% for the last twelve months as of Q2 2024, the company's financial health appears robust. Tactile Systems Technology also boasts a price-to-earnings (P/E) ratio of 11.33, which may attract investors looking for reasonably priced growth opportunities.
One of the notable InvestingPro Tips highlights the company's high shareholder yield, suggesting an efficient return of value to investors. Additionally, the valuation implies a strong free cash flow yield, indicating the company's potential to generate ample cash relative to its share price. For readers interested in exploring deeper insights, there are additional InvestingPro Tips available, providing a comprehensive analysis of Tactile Systems Technology's financial outlook.
Investors may also take comfort in the fact that the company's liquid assets exceed its short-term obligations, which is a reassuring sign of financial stability. Furthermore, with analysts predicting profitability this year and a solid return over the last three months, Tactile Systems Technology's stock could be poised for further appreciation, as suggested by the fair value estimates of $21.5 and $23.4 from analysts and InvestingPro, respectively.
To access more exclusive insights and metrics that could guide investment decisions, interested parties can visit InvestingPro for a total of nine detailed InvestingPro Tips on Tactile Systems Technology.
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