Insights

Why Shares of ShockWave Medical Jumped 13.5% on Monday

What happened
Shares of ShockWave Medical (NASDAQ: SWAV), a cardiovascular medical device company, rose 13.5% on Monday. The stock, which closed at $162.32 on Friday, opened at $181.58 on Monday and rose to a high of $184.21 by 2 p.m. The stock has a 52-week high of $249.73 and a 52-week low of $113.36. So far this year, the stock is up more than 1.4%. The company develops, manufactures, and sells catheters that use sonic pressure waves to break up calcified plaque in arteries, and increase blood flow and arterial size via a technique it calls intravascular lithotripsy (IVL).
Image source: Getty Images.

So what
The stock jumped because it was announced on Friday that ShockWave would be joining the S&P 400 MidCap Index, which means certain index funds will automatically buy shares of the company. The company also has momentum because it is coming off a strong first quarter.
Through March 31, the company reported revenue of $93.6 million, up 194% year over year. The increase was led by the launch in February 2021 of the company’s coronary catheter, the Shockwave C2. The increase marked a rebound from the impact of the pandemic and greater use of the company’s various ShockWave products. The company said it had net income of $14.5 million, up from a net loss of $23.6 million in the same quarter in 2021. Its earnings per share (EPS) were $0.39, compared to an EPS loss of $0.68 in the same period a year ago.
The company sees an $8.5 billion market opportunity for its IVL therapies and said these therapies cause less soft tissue damage than other current procedures to alleviate plaque, including high-pressure arterial balloons and atherectomies — procedures that use a catheter with a laser or tiny rotating blades to shave or vaporize arterial plaque. IVL methods have been used for 30 years to treat kidney stones, so the technique’s safety has a strong track record.
Now what
There’s little question about ShockWave’s growth potential if you look at its growth in revenue and EPS over the past few quarters. The one concern investors may have with the medical device company is whether the stock’s share price is inflated. Its price-to-earnings (P/E) ratio is 236.16, which obviously is high, but if you look at its price-to-earnings growth (PEG) ratio of -11.10, it’s a good deal.
SWAV PEG Ratio data by YCharts
It’s also a tough choice because, while it may make sense to wait for a dip to buy in on the stock, it may not dip that much considering its growth and recent index addition.
Jim Halley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ShockWave Medical. The Motley Fool has a disclosure policy. –

What happened

Shares of ShockWave Medical (NASDAQ: SWAV), a cardiovascular medical device company, rose 13.5% on Monday. The stock, which closed at $162.32 on Friday, opened at $181.58 on Monday and rose to a high of $184.21 by 2 p.m. The stock has a 52-week high of $249.73 and a 52-week low of $113.36. So far this year, the stock is up more than 1.4%. The company develops, manufactures, and sells catheters that use sonic pressure waves to break up calcified plaque in arteries, and increase blood flow and arterial size via a technique it calls intravascular lithotripsy (IVL).

Image source: Getty Images.

So what

The stock jumped because it was announced on Friday that ShockWave would be joining the S&P 400 MidCap Index, which means certain index funds will automatically buy shares of the company. The company also has momentum because it is coming off a strong first quarter.

Through March 31, the company reported revenue of $93.6 million, up 194% year over year. The increase was led by the launch in February 2021 of the company’s coronary catheter, the Shockwave C2. The increase marked a rebound from the impact of the pandemic and greater use of the company’s various ShockWave products. The company said it had net income of $14.5 million, up from a net loss of $23.6 million in the same quarter in 2021. Its earnings per share (EPS) were $0.39, compared to an EPS loss of $0.68 in the same period a year ago.

The company sees an $8.5 billion market opportunity for its IVL therapies and said these therapies cause less soft tissue damage than other current procedures to alleviate plaque, including high-pressure arterial balloons and atherectomies — procedures that use a catheter with a laser or tiny rotating blades to shave or vaporize arterial plaque. IVL methods have been used for 30 years to treat kidney stones, so the technique’s safety has a strong track record.

Now what

There’s little question about ShockWave’s growth potential if you look at its growth in revenue and EPS over the past few quarters. The one concern investors may have with the medical device company is whether the stock’s share price is inflated. Its price-to-earnings (P/E) ratio is 236.16, which obviously is high, but if you look at its price-to-earnings growth (PEG) ratio of -11.10, it’s a good deal.

SWAV PEG Ratio data by YCharts

It’s also a tough choice because, while it may make sense to wait for a dip to buy in on the stock, it may not dip that much considering its growth and recent index addition.

Jim Halley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ShockWave Medical. The Motley Fool has a disclosure policy.

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