SANUWAVE Health (OTC: SNWV) stock has been relatively quiet, but expect that trend to change. That’s because SANUWAVE’s transformational 2020 has set the company up well to continue its record-setting growth and positioned it to leverage a fully trained 100 person sales team to represent and sell two of the most respected diabetic would-care treatment devices in the sector- UltraMIST® and dermaPACE®. While Q3 was indeed impressive, investors are expecting to hear that sales momentum is gaining steam.
Although the stock itself has been lackluster, investor confidence has never been higher. And while that may sound contradictory, it’s not rare for stock prices to act independently from fundamentals. That could be the case with SNWV. After all, the company completed a company-changing acquisition last year, is set to uplist to the NASDAQ market, and has extended its sales reach into Mexico and Brazil. By the way, those two international markets are already ripe for partnership opportunities that could lead to accretive, non-dilutive expansion of its revenue base. More on that later.
More in focus is that with the share price consolidating, it appears as though investors are forgetting to value in the 2020 reached milestones. First, SNWV posted a blowout Q3 with revenues soaring more than 895% over the same period last year. If Q4 guidance is met, it would establish an increase of 415% compared to 2019 year-end totals. Second, the company acquired UltraMIST® an ultrasound healing therapy device that is expected to be a blockbuster product. In 2019, sales of UltraMIST® generated more than $15 million in sales and dropped more than $4 million in EBITDA to the bottom line. The crowning touch is expected to be an uplist to the NASDAQ markets, an event that is said to be imminent.
Thus, for investors focused on value opportunities, this one is screaming for attention. Lake Street Capital analysts have put out a report supporting the premise that SNWV is on the verge of breaking higher. In fact, they anticipate a banner year for the company and published a 2021 revenue estimate of $25 million and a share price target that is roughly 88% higher than current levels.
SANUWAVE deserves respect.
Best-in-Class Diabetic Wound Care Devices
The company’s achievements in 2020 deserve a higher level of recognition. In particular, investors should take notice that SANUWAVE is now uniquely positioned to penetrate a diabetic foot ulcer and chronic wound care market with two best-in-class treatment devices. In fact, it’s been noted that SNWV may be the only company in the diabetic wound-care market that can treat patients across the entire continuum of care. Having that advantage can lead to exponential growth. Moreover, the numbers posted thus far represent only the opportunities in the US markets. It’s likely that international expansion is already in the works.
Paramount to the SANUWAVE story is that after including the license to market two important biologics, it now has multiple groundbreaking treatments on the market. Its acquisition of Celularity’s UltraMIST® care system certainly unlocked the potential to accelerate revenues. Still, its own FDA-cleared DermaPACE®, which works extremely well in tandem with UltraMIST®, may combine as the premier frontline diabetic wound-care treatment combination in the market. And that is not pure speculation. Clinical evidence, patient response, and physician evaluations support that claim.
The kicker is that these revolutionary treatment devices are being represented by a massive sales team, which at last report exceeded 100 people. Notably, the record revenues set in Q3 came less than a full quarter after acquiring the device and sales team, which had not been fully trained to represent dermaPACE®. Thus, Q4 is expected to give a better representation of how impactful the new team can be.
And, with record-setting sales momentum at their backs, all eyes are focused on how the combined treatment device portfolio could set the stage for the company to surge in 2021. That attention is warranted. Keep in mind that dermaPACE® and UltraMIST® are being sold as a combination treatment for the first time in 2020. And with each offering tremendous therapeutic value, SNWV may be in a superior competitive position to target a massive treatment market with devices that are minimally invasive, painless during treatment, and are virtually contact-free. It’s no secret, by the way, that these devices offer tremendous therapeutic value. The only issue facing SNWV right now is that its share price appears to be tremendously undervalued. That, though, could change the minute that its Q4 numbers get announced, which as a “smaller company filer” are expected within 90 days of its fiscal year-end.
Thus, for those trying to time a purchase at these levels, the window is starting to close.
International Reach Positively Impacts Revenue Growth
Lake Street Capital analysts gave a report that supported a spike in revenues and an 88% increase to its share price. And while they offered some attention to the company’s expansion into the Latin markets, the opportunity still represents a wild card that could favorably impact growth. The best part of those opportunities is that the company has gone on record to say that international market expansion could be best served through partnership and/or licensing agreements. This means quick market penetrations that come with less capital expense and limited share dilution. It’s a win-win-win for SNWV, its shareholders, and its partners.
The better news is that the pieces necessary to expand are already in place. In Mexico, SANUWAVE’s dermaPACE® treatment received COFEPRIS approval for marketing and distribution. COFEPRIS is the Mexican version of the FDA. SANUWAVE also announced receiving ANVISA approval in Brazil to market its treatment device. Those two markets could be the framework for rapid expansion into neighboring countries.
Further, if UltraMIST® earns the same approvals, terms of partnerships and/or licensing deals could become considerably more valuable for SNWV. It would also establish a competitive advantage that could protect its space against lesser effective products trying to enter these markets. And if these devices offer best-in-class therapeutic value in the US, they could dominate most every international market they enter.
With the benefits of the devices known, investors still want the big prize- the NASDAQ uplisting.
Imminent NASDAQ Uplisting
Knowing the strength of the SNWV devices from a performance perspective, the revenue-generating strength of UltraMIST, and the power of having 100 people representing the company’s products, it makes little sense that the company is trading at levels more representative of a start-up biotech. This stock should be trading much higher on fundamentals and peer multiples alone. But, markets often miss the mark.
Markets also have a way of controlling prices. Some speculation exists that the share price is being held in a range by institutional investors who want to participate in an expected rally. Remember, an uplist would remove the restrictive barriers for certain investors to invest in the stock. Specifically, the NASDAQ listing could open the door for institutional investors to purchase shares, invest directly into the company through placements, and generate considerably more analyst coverage interest.
That trifecta of events would definitely help to expose the value opportunity that is now under the radar. It also introduces SNWV to a class of investors that can take substantial positions and tie up a significant portion of the expected small float after the uplist. Certainly, the extra eyes on SANUWAVE could translate to much higher share prices. That’s assuming they deliver on revenues, and all indications are that they will do precisely that.
A Large Market Brings Large Revenues
As noted, analysts predict that SANUWAVE will reach at least $25 million this year. Moreover, they have a price target that is 88% higher than current prices. Also, for the first time ever, SANUWAVE is leveraging a large, trained sales force to maximize sales opportunities from its substantial client book.
In other words, the sales team has immediate access and contacts to add either UltraMIST® or dermaPACE® to its client’s treatment arsenals. If all goes according to plan, these professional salespeople, combined with SNWV earning additional reimbursement coverage’s, could allow the devices to dominate the market and deliver substantial rewards for patients, treating physicians, and the company itself.
What can’t be ignored is that SANUWAVE is on the verge of exponential growth. Although the share price does not reflect that near-term likelihood, the revenue does. However, share prices do eventually catch up to fundamentals. Thus, investors should remain focused on the transformation taking place at the company instead of the daily ticker tape.
Records set in 2020 are expected to be broken. Therefore, getting distracted at this point could be a mistake. Instead, staying focused on the near and long-term rewards that SANUWAVE is positioned to deliver may be the best strategy to follow.
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