Misonix Inc: Aging Population Will Power Gains for Tiny Medical Device Maker

Misonix stockBull Case for Misonix Stock

I generally cover technology stocks, and sometimes I like to look at opportunities in the medical devices segment.

Think about it. The world is aging. The baby boomers will increasingly demand more health-care products and services. These tailwinds will benefit medical devices companies like Misonix Inc (NASDAQ:MSON), which has a market valuation of $314.0 million.

Misonix develops innovative, minimally invasive, ultrasonic medical devices used to accurately target and remove hard and soft tissues, including removing bone material and debriding wounds (removing defective tissue). (Source: “Corporate Overview,” Misonix Inc, last accessed February 16, 2021.)

The company’s technology is used in spinal surgery, neurosurgery, orthopedic surgery, cosmetic surgery, laparoscopic surgery, and other applications.

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A look at the one-year chart shows Misonix stock tripling from its March low, recently breaking higher to above its pre-pandemic level.

In the immediate term, MSON stock will likely face technically overbought selling pressure, given the rate of the price appreciation.

Chart courtesy of StockCharts.com

While Misonix stock looks good longer-term, the risk of a pullback is clear. A decline to its previous top at $11.00 to $15.00 would be a good entry point.

MSON Stock Boosted by Key Acquisition

Misonix Inc reports in a fiscal year ending June 30.

The company’s revenues were edging higher from fiscal 2016 to fiscal 2019, and its acquisition of Solsys Medical, LLC in September 2019 powered a revenue surge of 60.8% in fiscal 2020.

Fiscal Year Revenues (Millions) Growth
2016 $23.1 N/A
2017 $27.3 18.0%
2018 $36.7 34.5%
2019 $38.9 5.9%
2020 $62.5 60.8%

(Source: “Misonix Inc.” MarketWatch, last accessed February 16, 2021.)

With the Solsys Medical acquisition on the books for over a year, Misonix will need to focus on its organic growth.

Analysts estimate that the company will ramp up its revenues by 16.1% to $72.6 million in fiscal 2021, followed by 18.6% growth to $86.1 million in fiscal 2022. (Source: “Misonix, Inc. (MSON),” Yahoo! Finance, last accessed February 16, 2021.)

In the next few years, Misonix Inc will need to narrow its losses and move toward profitability as its revenues trend higher.

The company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) have been negative.

Fiscal Year EBITDA (Millions) Growth
2016 -$4.2 N/A
2017 -$5.5 -32.5%
2018 -$1.0 81.7%
2019 -$4.9 -388.0%
2020 -$14.1 -184.4%

(Source: MarketWatch, op. cit.)

Misonix Inc’s generally accepted accounting principles (GAAP) earnings per share (EPS) have also been negative. Look for Misonix to narrow the losses and move toward positive EBITDA.

Fiscal Year GAAP Diluted EPS Growth
2016 -$0.17 N/A
2017 -$0.22 -28.4%
2018 -$0.87 -294.8%
2019 -$0.79 8.6%
2020 -$1.19 -50.0%

(Source: MarketWatch, op. cit.)

The company’s GAAP loss is expected to narrow to $0.87 per diluted share in fiscal 2021 and to $0.67 per diluted share in fiscal 2022. (Source: Yahoo! Finance, op. cit.)

Misonix Inc is likely a few years away from recording positive free cash flow (FCF), but look for the company’s FCF to improve as its revenues rise and its costs are controlled.

Fiscal Year FCF Growth
2016 -$788,070 N/A
2017 -$1.8 Million -123.7%
2018 -$939,410 46.7%
2019 -$4.4 Million -364.9%
2020 -$27.0 Million -517.8%

(Source: MarketWatch, op. cit.)

Analyst Take

Institutional ownership has been rising for Misonix stock. Currently, 93 institutions hold a 43% stake in the outstanding shares. (Source: Yahoo! Finance, op. cit.)

The next few years will be critical for Misonix Inc as the company digests its acquisition and drives organic growth.

In the near term, MSON stock could pull back to a more attractive entry point for investors.