Is Senseonics Holdings a Smart Investment in 2022?

Senseonics Holdings, Inc. (SENS) in Germantown, Md., is a medical technology company that is focused primarily on developing and manufacturing glucose monitoring products for diabetic patients in the United States, Europe, the Middle East, and Africa. However, the company has an ISS Governance QualityScore of 9, which indicates high governance risk.

Yesterday, the U.S. FDA approved SENS’ Eversense E3 continuous glucose monitoring (CGM) system for periods of up to six months. Nevertheless, Raymond James analyst Jayson Bedford said, “We still view SENS as one of the most dislocated stocks in our universe, as estimates are trending lower, and the valuation, in our view, is unsustainable…We respect management, and acknowledge that the Eversense technology is differentiated, but expectations, in our view, are too high.”

The stock declined marginally in price intraday yesterday to close yesterday’s trading session at $2.10. Also, the stock has declined 21% in price year-to-date and 25.7% over the past month.

Here is what could shape SENS’ performance in the near term:

Uncertainties due to COVID-19

SENS’ stated in its fiscal third-quarter earnings report that the COVID-19 pandemic continues to pose a significant risk to the company’s operations. Also, pandemic-fueled uncertainties are expected to impact the FDA’s review of its 180-day product PMA supplement application.

Regarding this, SENS’ President and CEO Tim Goodnow said, “We understand that the FDA is at full capacity managing the backlog of COVID-19 related filings, creating longer than expected review timelines. We are confident a decision regarding approval of the 180-day system will be made in the coming weeks as the FDA continues to clear out the backlog.”

Bleak Financials

For its fiscal third quarter, ended Sept. 30, 2021, SENS’ net revenues declined 46.3% year-over-year to $276,000. Its gross loss amounted to $1.25 million due to a significant rise in the cost of sales. Its operating loss worsened 28.6% from the same period last year to $16.03 million.

However, SENS’ net income came in at $42.91 million due to a $50.08 million gain in the  fair value of derivatives and $58.95 million in  other income.

Consensus Rating and Price Target Indicate Potential Downside

Of the three Wall Street analysts that rated SENS, one rated it Buy, while one rated it Hold, and one rated it Sell. The 12-month median price target of $1.90 indicates a 10% potential downside from yesterday’s closing price of $2.11. The price targets range from a low of $0.80 to a high of $3.00.

POWR Ratings Reflect Bleak Prospects

SENS has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has an F grade  for Value and a D for Momentum and Sentiment. SENS’ 69/09 forward Price/Sales multiple is 1,141.3% higher than the 5.57 industry average, justifying its Value grade.

In addition, the stock is currently trading below its 50-day and 200-day moving averages of $2.78 and $3.11, respectively, indicating a death-cross downtrend, in sync with its Momentum grade. Also, analysts expect SENS’ EPS to remain negative until at least fiscal 2022, justifying the Sentiment grade.

Of the 56 stocks in the F-rated Medical – Diagnostics/Research industry, SENS is ranked #48.

Beyond what I have stated above, view SENS’ ratings for Growth, Stability, and Quality here.

Click here to checkout our Healthcare Sector Report for 2022

Bottom Line

SENS’ unique product portfolio positions it as one of the most promising medical technology stocks. However, several SENS’ products are currently pending FDA approval. Moreover, with bleak financials and negative profit margins, we think SENS is best avoided now.

How Does Senseonics Holdings, Inc. (SENS) Stack Up Against its Peers?

While SENS has a D rating in our proprietary rating system, one might want to consider looking at its industry peers, Global Cord Blood Corporation (CO), Qiagen N.V. (QGEN), and Agilent Technologies, Inc. (A), which have an A (Strong Buy) rating.

SENS shares were trading at $2.02 per share on Tuesday morning, down $0.09 (-4.27%). Year-to-date, SENS has declined -24.34%, versus a -6.26% rise in the benchmark S&P 500 index during the same period.

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.

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