Retractable Technologies, Inc. Up 458% Year-to-Date, More to Come?

Retractable Technologies, Inc. Up 458% Year-to-Date, More to Come?A Soaring Stock Most People Have Never Heard of

At the beginning of this year, most people had never heard of Retractable Technologies, Inc. (NYSEAMERICAN:RVP). Today, RVP stock is still a relatively unknown ticker, but the few investors who loaded up on it are laughing all the way to the bank.

Since the first trading day of 2020, Retractable Technologies stock has skyrocketed about 458%.

And there is a very good reason for that.

You see, Retractable Technologies, Inc. is in the business of making safety needle devices for the healthcare industry.

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The main appeal of the company’s products is that they offer protection from needle-stick injuries, prevention of cross-contamination through reuse of needles, and reduction of disposal costs. (Source: “Retractable Technologies, Inc. Reports Increased Income and Sales for Second Quarter Of 2020,” Retractable Technologies, Inc., August 17, 2020.)

The company’s main offering is the “VanishPoint” line of syringes, blood collection, and IV catheter products, which use a patented friction ring mechanism.

The needle of a VanishPoint syringe is automatically retracted directly from the patient into the barrel of the syringe when the plunger handle is fully depressed. As a result, there is no exposure to the contaminated needle.

Among its other products, Retractable Technologies, Inc. also offers “Patient Safe” syringes, which are uniquely designed to reduce the risk of bloodstream infections resulting from catheter hub contamination.

You can probably see where this is going. The outbreak of COVID-19 has turned into a global pandemic. And pharmaceutical companies are racing to develop a vaccine for it. When it comes to delivering a vaccine to the mass public, Retractable Technologies products’ ability to prevent needle-stick injuries and needle reuse makes them quite appealing.

Indeed, earlier this year, the company announced that it won a contract to supply automated retraction safety syringes to the U.S. Department of Health and Human Services. The delivery order has a total value of $83.8 million. (Source: “Form 8-K,” United States Securities and Exchange Commission, May 1, 2020.)

The announcement did not say what those syringes would be used for. But given the current situation, securing inventory for a possible COVID-19 vaccine is likely a priority for governments.

Here’s the neat thing. As I said, Retractable Technologies, Inc. was not well-known stock, and that’s simply because it wasn’t a big company. In 2019, the company earned $41.8 million in total sales. (Source: “Form 10-K,” United States Securities and Exchange Commission, last accessed August 17, 2020.)

In other words, the recent order from the U.S. Department of Health and Human Services has a value twice as much as Retractable Technologies, Inc.’s last reported annual sales. To call it a major catalyst for RVP stock would be an understatement.

As you’d expect, the company was able to improve its financials. According to its latest earnings report, Retractable Technologies generated $11.6 million of revenue in the second quarter of 2020, representing a 20.6% increase year-over-year. (Source: “Retractable Technologies, Inc. Reports Increased Income and Sales for Second Quarter Of 2020,” Retractable Technologies, Inc., August 17, 2020, op. cit.)

Among the approximate $2.0-million top-line increase, $1.4 million was attributable to sales to the U.S. Department of Health and Human Services.

Due to the higher volume of units sold, the cost of RVP’s manufactured products in the second quarter of 2020 rose 21.1% year-over-year. But because of the company’s revenue growth, its gross profit still increased 25.3%.

Thanks to the increase in net revenue and gross profit, Retractable Technologies’ operating income came in at $960,000 in the second quarter, which nearly tripled the operating income earned in the year-ago period.

While the company has not provided any financial outlook, it did say that sales to the U.S. Department of Health and Human Services are expected to “increase each quarter through May 2021.” (Source: Ibid.)

Retractable Technologies, Inc. (NYSEAMERICAN:RVP) Stock Chart

Chart courtesy of StockCharts.com

Analyst Take

Ultimately, as a micro-cap stock (with a market cap of about $248.1 million at the time of this writing), Retractable Technologies, Inc. could see some volatility after it shot through the roof.

As the above chart shows, RVP stock has already experienced some pullback after soaring above $13.00 per share in late July. However, with a business that’s expected to deliver substantially better financials over the upcoming quarters, Retractable Technologies is a name that should be added to a growth investor’s watch list.