Shares of continuous glucose monitoring (CGM) system-maker Senseonics Holdings, Inc. (SENS) have soared 254.6% over the past six months and 680% over the past nine months to close yesterday’s trading session at $3.12. The gains have been driven primarily by r/wallstreetbets subreddit’s interest in it and investors’ optimism surrounding the announcement of positive clinical results from its PROMISE study.
However, Wall Street analysts expect the stock to hit $0.88 in the near term, which indicates a potential 71.8% decline. This is justified because its sky-high valuation is not in sync with its bleak growth prospects. In terms of forward EV/S and P/S, SENS is currently trading at 96.43x and 96.95x, respectively, which are much higher than the 7.10x and 7.86x industry averages. Its EPS is expected to remain negative in 2021 and 2022. So, we think it’s wise to avoid SENS now.
However, the global diabetic care market is expected to hit $41.71 billion by 2027, according to an Emergen Research report. More sedentary lifestyles in the remote working era and an aging population have been driving a significant increase in diabetic patients. According to SingleCare, roughly 700 million adults worldwide are expected to have diabetes by 2045. Against this backdrop, it could be wise to bet on shares of dominant companies in the diabetic care market Eli Lilly and Company (LLY), Abbott Laboratories (ABT), and Novo Nordisk A/S (NVO). Based on their fundamental strength and consistent innovations, all three are well positioned to capitalize on the growing demand for diabetic care solutions .
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Eli Lilly and Company (LLY)
LLY is a drug manufacturing company that discovers, develops, manufactures, and markets human pharmaceutical products worldwide. Its portfolio includes diabetes and other endocrinology products such as Baqsimi, Basaglar, Forteo, and Humalog. LLY is based in Indianapolis, Ind.
The company’s revenue increased 16.1% year-over-year to $6.81 billion for the first quarter, ended March 31, 2021. LLY’s non-GAAP net income for the quarter was $1.70 billion, which represents a 15.7% year-over-year rise. Its non-GAAP EPS came in at $1.87, up 16.1% from the same period last year.
For the quarter ending September 30, 2021, analysts expect LLY’s EPS to increase 22.7% year-over-year to $1.89. The company’s revenue is expected to increase 15.4% year-over-year to $6.65 billion for the quarter ended June 30, 2021.
LLY announced on July 6 that its EMPEROR-Preserved phase III trial met its primary endpoint and demonstrated significant risk reduction with Jardiance for the composite of cardiovascular death, among others. With approval, Jardiance could become the first and only clinically proven therapy to improve outcomes for the full spectrum of heart failure patients regardless of ejection fraction. The stock has soared 58.3% over the past nine months to close yesterday’s trading session at $235.82.
It’s no surprise that LLY has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Quality. In addition to the POWR Ratings grades we’ve just highlighted, we’ve also rated LLY for Growth, Sentiment, Value, Stability, and Momentum. Click here to see all the LLY ratings.
LLY is ranked #12 of 224 stocks in the Medical-Pharmaceuticals industry.
Abbott Laboratories (ABT)
One of the prominent players in the healthcare space, ABT is focused on cardiovascular, diabetes care, diagnostics, neuromodulation, nutrition and medicine. The Abbott Park, Ill., company operates through four segments: established pharmaceutical products, diagnostic products, nutritional products, and medical devices.
ABT is expected to announce its second quarter financial results on July 22. The company’s net sales increased 35.3% year-over-year to $10.46 billion for the first quarter, ended March 31, 2021. Its net income came in at $1.79 billion, which represents a 217.9% increase from the same period last year. Its adjusted EPS was $1.32, up 103.1% year-over-year.
Analysts expect ABT’s EPS and revenue to increase 19.2% and 13.5%, respectively, year-over-year to $4.35 and $39.29 billion in its fiscal year 2021. It surpassed the consensus EPS estimates in each of the trailing four quarters.
ABT announced on June 30 that its XIENCE family of stents had received the U.S. Food and Drug Administration’s approval for one-month DAPT labelling for high bleeding risk patients in the U.S. Consequently, the company could see increasing demand for its solution. The stock has gained 29.7% over the past year to close yesterday’s trading session at $119.87.
ABT’s bright prospects are also apparent in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has an A grade for Growth, and a B grade for Value, Quality, and Stability. Click here to see the additional POWR ratings for ABT (Momentum and Sentiment).
ABT is ranked #11 in the Medical-Pharmaceuticals industry.
Novo Nordisk A/S (NVO)
Headquartered in Bagsvaerd, Denmark, NVO is a global healthcare company engaged in diabetes care. The company operates through two segments: diabetes and obesity care; and biopharmaceuticals. It offers a range of products that include NovoLog/NovoRapid, NovoLog Mix/NovoMix, and Prandin/NovoNorm.
For the first quarter ended March 31, 2021, NVO’s net sales came in at DKK33.80 billion ($5.37 billion) versus DKK33.89 billion ($5.38 billion) in the prior-year quarter. However, the company’s net income increased 6.1% year-over-year to DKK12.62 billion ($2 billion). Its EPS increased 7.9% year-over-year to DKK5.45 ($0.87).
NVO’s revenue is expected to increase 6.5% year-over-year to $5.35 billion for the quarter ending September 30, 2021. The company’s EPS is expected to be $0.77 for the quarter ended June 30, 2021, which represents a 6.9% year-over-year increase.
The company announced on June 4, 2021, that the U.S. FDA had approved Wegovy for chronic weight management. Wegovy is the first and only once-weekly glucagon-like peptide-1 (GLP-1) receptor agonist therapy approved for weight management for people living with obesity. The stock has rallied 27.1% over the past three months to close yesterday’s trading session at $86.26.
NVO’s POWR Ratings are consistent with this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. It has an A grade for Stability and Quality, and a B grade for Value. Click here to see NVO’s ratings for Growth, Sentiment, and Momentum as well.
NVO is ranked #10 in the same industry.
Click here to checkout our Healthcare Sector Report for 2021
LLY shares were trading at $234.67 per share on Thursday morning, down $1.15 (-0.49%). Year-to-date, LLY has gained 40.19%, versus a 15.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand.
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