STAAR Surgical Shines In Today's Uncertainties Due To Growing U.S. Revenue

Ivan-balvan/iStock via Getty Images

STAAR Surgical Company (NASDAQ:STAA) is 1 of nan starring aesculapian exertion institution that focuses connected treating impaired vision. It manufactures and sells implantable lenses for nan oculus and is good known for its EVO Visian ICL. The USFDA precocious approved STAAR Surgical's Evolution successful Visual Freedom (EVO) Visian implantable Collamer lenses (ICL), bringing a caller curen action to an estimated 100 cardinal U.S. individuals pinch myopia. This has enabled nan commercialization of nan EVO lens to commencement successful nan U.S. EVO ICL is simply a type of implantable lens that is inserted into nan oculus to correct imagination without nan removal of corneal tissue, arsenic opposed to LASIK and PRK, which entails removing insubstantial from nan cornea. This is simply a game-changing invention successful nan section of refractive surgery.

As a result, STAA's home income person accrued significantly, resulting successful full income extracurricular of nan U.S. being down to 95%. In fact, nan guidance claims that they saw important maturation successful nan U.S. market, particularly in Q4'22 erstwhile location was a 600% summation (YoY) successful Doctor Finder visits. According to nan management, affirmative momentum will proceed successful FY'23, arsenic they are ramping up their R&D and advertizing initiatives. This makes nan institution appealing and is well-positioned successful nan rapidly expanding world implantable interaction lens market.

In fact, according to nan management, they are still affirmative astir wide cardinal market's request environment, peculiarly successful China wherever they expect a highest summertime implant play for ICL procedures. The double-digit maturation of 26% (YoY) successful ICL nett gross outlook successful FY'23 is besides impressive, particularly considering nan existent inflationary situation and stoppage of support of its non-core cataract IOL. It is worthy noting that STAA remains fundamentally liquid and has nary semipermanent indebtedness connected its balance sheet. To sum it up, STAAR Surgical Company banal is simply a bargain successful today's weakness.

Company Overview

STAAR Surgical Company reported a beardown apical statement gross summation of $284.4 cardinal astatine nan extremity of FY'22, up 23.40% from $230.5 cardinal successful FY'21. This is owed to accordant maturation successful each of its cardinal markets. Domestic gross (U.S.) accrued by 45.4% complete nan erstwhile year, China by 38.0%, Japan by 5.2%, and different world markets by 8.9%. A large chunk of STAA's full gross comes from nan Asian marketplace (52% derived from China), wherever nan institution is well-established. It is expected that nan Asian market, including China, will proceed to acquisition economic betterment this 2023. This gives STAA opportunity to grow successful nan existent macro uncertainties.

According to nan management, China continues to show signs of betterment from nan Covid-19 pandemic, arsenic quoted below.

Our section squad surely has expressed assurance successful position of what's happening astatine nan thoroughfare level pinch China. We're not seeing COVID testing. There are nary recreation restrictions. We're seeing much normal refractive procedures being done astatine nan oculus clinic. Source: Q4'22 Earnings Call Transcript.

This reassures investors that nan headwinds from nan Chinese marketplace and nan different headwinds mentioned below, which led to a 0.59% year-over-year slowdown successful its full world refractive procedures, are transitional.

During nan 4th quarter, refractive procedures, including EVO successful China were impacted by COVID. First, opening pinch nan alteration successful user behaviour that STAAR called retired connected nan November 2, 2022 net call. Later, protests and nan lifting of nan country's COVID Zero argumentation follow. Then a consequent emergence successful COVID infections further impacted nan level of refractive procedures successful nan 4th quarter. Against these operating backdrop, we are proud to present 18% ICL portion maturation successful China for nan 4th fourth of 2022. Source: Q4'22 Earnings Call Transcript

Furthermore, STAA has much than 1,200 surgeons successful China who are presently utilizing its merchandise and much than 600 surgeons successful nan US who are authorized to implant EVO lenses, supporting its increasing ICL gross projection of $340 cardinal for FY'23.

On apical of its increasing apical line, STAA enjoys increasing margin, arsenic shown successful nan image below.

STAA: Improving Margin (Source: Data from SeekingAlpha. Prepared by nan Author)

STAA besides continues to amended its operating ratio by focusing connected its halfway business (ICLs) and will nary longer support its IOL business aft 2023, arsenic guidance sees it arsenic a low-margin business.

...our low-margin different products business, which represents astir 5% of income and consists of cataract IOLs, IOL injectors and injector parts, has faced expanding proviso concatenation challenges. Source: Q3'22 Earnings Call Transcript.

This will thief STAA navigate adjacent twelvemonth pinch continued maturation successful margins. It makes consciousness that astatine these levels, location are affirmative insider trading activities.

STAA: Positive Insider Trading Activity (Source: Finviz)

Approaching Near Support

STAA: Weekly Chart (Source: Author's TradingView Account)

STAA is 1 of galore companies that person suffered severely pursuing nan caller marketplace sell-off successful nan past fewer days. It was rejected aft attempting to waste and acquisition supra its 200-day elemental moving average. In fact, it is now trading beneath its 20-day elemental moving average, implying important bearish momentum. STAA is already trading wrong a important support area betwixt $54 and $63. Even though MACD is still signaling bullish momentum, today's value action weakness mightiness origin prices to autumn further. Further consolidation successful this area could disrupt today's bearish momentum and perchance trigger a pivot successful favour of bullish momentum. As a result, it is wise to support an oculus connected this stock.

Trading At A High Multiple, But...

STAA banal is now cheaper than it was historically aft a steep diminution from its highest successful 2021. The pursuing valuation multiples propose that nan institution is really trading cheaply based connected its guardant (Non-GAAP) P/E of 50.56x compared to its 5-year mean of 137.45x and its guardant EV/EBITA of 40.18x compared to its 5-year mean of 199.03x. Looking astatine its increasing net per stock of $0.81 and cardinal marketplace stabilization, I judge STAA is trading cheaply arsenic of this writing. However, a precocious attraction of vulnerability to China remains a cardinal consequence for nan company, particularly successful ray of its caller issues, which could affect nan relationship betwixt China and U.S.

Conclusive Thoughts

STAAR Surgical Company's improving profitability is shown successful its increasing net per share. It has a beardown attraction connected its U.S. operations, and according to nan management, they will grow their workforce successful nan U.S., which will thief to further penetrate nan U.S. marketplace and facilitate growth. This is very timely since nan FDA is reviewing a caller argumentation requiring aesculapian professionals to pass patients of possible LASIK broadside effects. Hence, this could perchance boost nan U.S. ICL gross of STAAR Surgical Company.

STAA: Huge TAM (Source: STAA's Investor Presentation)

Additionally, STAAR Surgical Company ended FY'22 pinch improving liquidity, arsenic shown by its existent ratio of 6.03x, which is amended than its 3-year mean of 5.29x. Moreover, nan institution has a immense full addressable marketplace (TAM), arsenic shown successful nan image above. These factors make STAAR Surgical Company charismatic connected a semipermanent horizon, making it a bully 'buy connected fear' candidate.

Thanks for reference and bully luck!

Hi there! I americium an equity investigation expert by occupation but a trader by heart, pinch a inheritance successful accounting. I effort my champion to beryllium a responsible investor, guided by my expertise successful basal and method analysis. I bask surfing and riding nan trends astir equity, currencies and cryptocurrency. With a small complete 5 years of acquisition successful nan market, I bask keeping my mind unfastened to caller ideas from different finance viewpoints since it allows maine to grow my knowledge successful this wild, but ever energizing investing industry. PS. I apologize if I americium incapable to respond to your feedback immediately. However, erstwhile I person free time, I publication done it each and bask reference some affirmative and antagonistic feedback. Thank you!