Why Is This Stock Going Up When Financials Are Down

The stock of Stereotaxis (STXS) has had a huge run this year, almost quadrupling from $1.20 to $4.60 – and one could argue for no reason. 

As I’ll explain in my report below, financials are flat to down – and have been for years. But a recent takeover of a somewhat similar company may tell the tale.

The other odd part of this story – to me anyway – is the large number (36 million shares or a full 1/3rd new dilution) of 65 cent warrants that are now deep in the money. This stock only trades 140,000 shares a day on average. That dilution could swamp the stock for months.

Stereotaxis is a medical equipment device maker. They are focused on the development of magnetic robotics to improve surgical procedures.

The company’s offers a large robotic surgical unit.  It provides physicians with better control, vision and speed during the surgical procedure.  

The system uses a varying magnetic field to navigate a magnetic catheter through the patient. The physician operates the device remotely from an adjacent control room.

The clinical value of the robotic magnetic system has been written up in over 350 papers and used in over 350,000 procedures.

In August Siemens Healthineers (SMMNY, SHL – GR) provided a baseline when it bought competitor Corindus (CVRS) for $1.1 billion. 

Corindus has a robotic-assisted surgical system used in interventional vascular procedures. 

STXS targets cardiology procedures and arrythmias. In the 10-K vascular procedures is named as a potential application.

Analysts had been forecasting relatively modest revenue for Corindus – $19 million for 2019, $29 million for 2020. Corindus had $10 million of revenue in 2018 and recorded a large loss.

The relative similarity of the products leads to comparisons of potential takeover value. Given that Corindus was taken over for roughly 60x sales, a similar valuation can make Stereotaxis appear quite attractive.

Assuming $30 million of revenue for Stereotaxis and applying a 60x multiple gives us an impressive price target of $17.50!

A second acquisition datapoint comes from the February takeover of Auris Health by Johnson & Johnson (JNJ-NYSE). 

Auris is a private company so I don’t have much information on their financials, but J&J took them over for $3.4 billion of cash and a $2.5 billion contingent payment.  Auris was a venture capital firm that had raised more than $700 million prior to the acquisition.

Auris has a surgical robotics device called Monarch that focuses on lung cancer and FDA approved for bronchoscopic diagnostic procedures.

QUICK FACTS

Trading Symbols:                      STXS
Share Price Today:                    $4.25
Shares Outstanding:                 115.6 million
Market Capitalization:              $491 million
Net CASH:                                   $31.6 million
Enterprise Value:                       $460 million
2019 Revenue Estimate:           $30 million
EV/Sales                                       15x

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This article was written by Keith Schaefer, Editor/Publisher. We did not receive compensation for this article, and we have no business relationship with any company whose stock is mentioned in this ...

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Dick Kaplan 5 months ago Member's comment

That article does a great job compiling information, but the headline and synopsis are not completely correct.

The stock market is forward looking and the new system has already garnered significant interest and the system sales are set to rebound. The company also broke even only selling 1 system.

Even at the bottom of the article it uses future projections and states the price at 4.50 doesn’t make sense. But at.17 cents 4.50 is a PE of around 30 which for a company showing 300% revenue growth if true would be completely justified.