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Nevro (NVRO) Now a Strong Buy: Should You Add the Stock?


On Oct 13, Redwood City, CA-based Nevro Corp Inc. NVRO was raised to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

The upgrade was primarily driven by solid estimate revisions over the last 60 days.

The company’s estimate revision trend for the current year is impressive with two estimates moving north over the past two months with no downward movement taking place. Accordingly, estimates have improved from a loss of $1.44 to a loss of $1.39 per share. Notably, in the last 30 days, the full-year 2017 estimate moved up from a loss of 80 cents to a loss of 74 cents per share.

The company has an impressive long-term expected earnings growth rate of 30%, well ahead of the industry average of 19.8%.

In fact, a glimpse at the share price trend reveals a stupendous one-year return of almost 130.6%, way better than the S&P 500’s 7.3% over the same time frame. The stock also posted a positive earnings surprise in the last four quarters, the average being almost 25%.

NEVRO CORP Price and Consensus

NEVRO CORP Price and Consensus | NEVRO CORP Quote

Key Catalysts

The HF10 therapy platform is the major catalyst in our view. This platform demonstrates an exclusive Spinal cord stimulation therapy (a neuro-modulation method) of the company that provides electrical pulses to alleviate pain. We believe Nevro is set to gain significant market traction in the coming quarters, taking the global market sentiments into consideration. The global neuromodulation market is expected to grow at a CAGR of 11.2% to reach $6.20 billion by 2020.

Of the other notable developments, Neurosurgery, the official Journal of the Congress of Neurological Surgeons, has accepted a publication from Nevro that rates HF10 therapy in terms of ‘superior efficacy’ and ‘durability of outcomes’. Additionally, leading health insurers like Aetna, Humana, Kaiser and CMS have updated their coverage policies to include HF10 therapy, a significant positive in our view.

Nevro reported an impressive second quarter of fiscal 2016 recently, surpassing the Zacks Consensus Estimate on both counts. The company posted sales of $55.4 million (up 385% year over year) in the quarter. The company is also well poised internationally, having sales of $14.8 million and reflecting an increase of 30% from the year-ago quarter, courtesy of solid sales growth in Europe and Australia.

Better-ranked stocks in the broader medical sector include Cepheid Inc. CPHD, Healthways Inc. HWAY and PRA Health Sciences Inc. PRAH. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cepheid has a long-term expected earnings growth rate of approximately 21.3%. Notably, the stock represents an impressive year-to-date return of 47.4%.

Healthways has a long-term expected earnings growth rate of 13.3%. The company posted a stupendous year-to-date return of 94.3%.

PRA Health Sciences has an expected earnings growth of 18%. The company posted a promising year-to-date return of almost 21.7%.

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