Asensus Surgical’s Name Has Changed, But Investors’ Valuation Concerns Haven’t

Stocks to sell

Those looking for TRXC stock on Yahoo! Finance or any such site won’t find it. That’s because TransEnterix recently changed its name to Asensus Surgical (NYSE:ASXC).

surgeons operating on a patient

Source: Dmytro Zinkevych / Shutterstock.com

Like a new paint job, the company hoped the name change would spruce up its offering. I mean, a company’s name aligning with its products and services makes a heck of a lot of sense.

Let’s dive into what Asensus does and why ASXC stock is intriguing to many investors.

Asensus’ Innovations in Surgical Technology

Digitization is everywhere, and Asensus’ aim is to pioneer “a new standard of surgery for increased control, less variability and consistently superior outcomes.”

Sounds great.

Indeed, the company’s integration of machine learning and augmented intelligence into various laparoscopic procedures to help deliver the best outcomes is a winning idea.

Asensus says that its system has the following capabilities:

  • Pre-Operative: A machine learning-driven database for pre-operative simulations, enabling surgeons and their teams to deliver the best surgical outcomes.
  • Intra-Operative: Provides perceptive real-time guidance through augmented intelligence, helping to guide better decision making, improved collaboration and enhanced information sharing during surgery.
  • Post-Operative: Offers performance analytics to help optimize surgical performance over time and set the groundwork for global standardization.

In a nutshell, the company’s goal is to improve surgeries in order to reduce recovery times and improve outcomes. It’s a win-win-win for everyone. The company’s sales go up. Hospitals are able to reduce the cost of care and release patients more quickly. And patients can avoid large hospital bills.

Indeed, mass vaccination efforts and a clearer line of sight to the end of the pandemic are giving ASXC stock another boost. Investors are betting that reduced surgical delays after the pandemic is over will boost Asensus’ sales.

Accordingly, after Asensus soared 850% over the last 12 months,   it’s easy to see this stock jumping  nearly 1,000% over the next year.

TRXC Stock Is Certainly Not Cheap at These Levels

Like many other penny stocks that have skyrocketed of late due mainly to share purchases by retail investors, the valuation of ASXC stock has reached astronomical levels.

In fact, the company’s enterprise value has jumped to 287 times its trailing sales and 132 times its forward sales. So ASXC stock is pricing in a heck of a lot of growth right now.

The problem is that the company’s revenue has been declining for awhile. Its sales drops have been partly caused by the aforementioned delays of surgeries caused by the pandemic. However, in recent years its results show a troubling picture of a company bleeding cash and issuing a ton of shares along the way to pay for its growth.

Asensus has lost a whopping $669 million over the past nine years, averaging an annual loss of $74 million. Meanwhile, the company’s diluted average share count has ballooned more than 700-fold over this time frame. That’s not a recipe for success. Indeed, if the company can’t grow profitably, most investors are likely to abandon this stock pretty soon.

The Bottom Line

The sort of technological innovation companies like Asensus bring to the table are in high demand right now. Indeed, there’s certainly reason to be very bullish about technologies such as the ones provided by Asensus right now.

However, investors need to keep in mind that even if the company does manage to grow at light speed, its bottom-line performance will be under the microscope. Asensus has yet to prove to fundamentals-oriented investors that it has a sustainable business model. As a result, I don’t expect this stock to climb meaningfully, aside from gains produced by meme-related speculative hysteria.

Consequently, I’m very cautious about this name right now. There are plenty of other great growth stocks out there today with far better risk/reward fundamentals.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.