we think that Penumbra (NYSE:PEN), A Medical Device Company With a Focus on Interventional Therapy Is a Better Pick Than It Currently gap stock (NYSE:GPS), a specialty retailer selling casual apparel, accessories and personal care products, is trading at 6.8x trailing revenue compared to 0.2x for Gap, despite being the more expensive of the two. The difference in valuation of these two companies can be attributed to Penumbra.
If we look at stock returns, Penumbra’s -45% change is comparatively better than Gap’s -67% return over the past twelve months. This compares with a -7% change in the broader S&P 500 index. Gap has faced headwinds in recent quarters, with supply chain issues weighing heavily on its stock performance. Penumbra’s earnings loss earlier this year pushed its stock level lower. The Jet 7 Xtra Flex catheter recall in late 2020 also impacted the performance of its business and stock in 2021.
While both companies have potential for top-line expansion, Penumbra is expected to outperform. There’s more to compare, and in the sections below, we discuss why we believe PEN stock will deliver better returns than GPS stock over the next three years. We compare multiple factors such as historical revenue growth, returns and valuation multiples in an interactive dashboard analysis penumbra vs gap, Which stock is the better bet? The excerpts of the analysis are summarized below.
1. Penumbra’s Revenue Growth Has Been Strong in Recent Years
- Gap’s revenue growth of 53% over the past twelve months is better than Penumbra’s 32%.
- However, looking at a longer time frame, Penumbra sales grew at an average growth rate of 19.6% in 2019 to $0.7 billion, compared to $0.4 billion in 2018, while Gap grew its revenue at an average rate of 1.3%. saw an increase of $16.7. billion in 2021, compared to $16.6 billion in 2018.
- The vascular segment of Penumbra is driving the growth of the company. Its vascular thrombectomy and peripheral embolization medical devices are witnessing high market penetration. The recovery in total process volume helped the segment’s sales grow 53% annually in 2021.
- The company’s Neuro segment has seen its sales increase by 16% in 2021, led by higher demand for Neuro Access, Embolization and Thrombectomy medical devices. However, the recall of its Jet 7 Xtra Flex catheter adversely impacted overall segment revenue growth.
- Looking ahead, continued market penetration, increased process volume, and the company’s focus on new products will drive revenue growth for Penumbra in the years to come.
- Gap faced headwinds in 2021 with supply chain issues, driven primarily by West Coast port delays and longer transit times from the sudden and prolonged closure of factories in Vietnam.
- Gap is now diversifying port exposure through the Eastern and Southern Ports, sourcing its Mexico and Central America in 2022 to increase manufacturing speeds. It will also sell smaller non-strategic brands and underperforming North American stores to consolidate its core business.
- Our penumbra revenue And gap revenue Dashboards provide more information about companies’ sales.
- Penumbra’s revenue is expected to grow faster than Gap’s over the next three years. The table below summarizes our revenue expectations for both companies over the next three years. This points to a CAGR of 19.3% for Penumbra as compared to a CAGR of 1.6% for Gap based on Trefis Machine Learning Analysis.
- Note that we have different methods for companies that are negatively impacted by COVID and those not impacted or positively affected by COVID while forecasting future revenue. For companies negatively impacted by COVID, we consider the quarterly revenue recovery trajectory to estimate the recovery of the pre-Covid revenue run rate. Beyond the recovery point, we apply the average annual growth observed in the three years prior to COVID to simulate a return to normalcy. For companies reporting positive revenue growth during COVID, we consider annual average growth before Covid, with a certain weighting for growth during COVID and the previous twelve months.
2. Gap is more profitable, but it comes with higher risk
- Gap’s current operating margin of 3.1% is better than Penumbra’s -3.2%.
- This compares with figures of 4.0% and 8.7%, respectively, seen in 2019 before the pandemic.
- Gap’s free cash flow margin of 3.8% is better than Penumbra’s 2.5%.
- Our penumbra operating income And gap operating income The dashboard has more details.
- Given the financial risk, Penumbra is better positioned than Gap. Its <1% as a percentage of equity is much lower than the 34% for Debt Gap, while its 18% as a percentage of assets exceeds 7% for the cash latter, meaning that Penumbra, its better debt. The cushion, with the position and high liquidity, offers less financial risk than the Gap.
3. Net Of It All
- We see that Penumbra has demonstrated superior revenue growth in recent years and comes with less financial risk. Gap, on the other hand, is more profitable and trades at comparatively lower valuations.
- Now, looking at the possibilities of using P/S as a basis, due to high volatility in P/E and P/EBIT, we believe that Penumbra, despite its high valuation, is currently the better option of the two. Is.
- The table below summarizes our revenue and return expectations for Penumbra and Gap over the next three years and points to an expected return of 70% for Penumbra over the period. Just a 2% expected return for Gap, which means investors are likely. Based on Trefis Machine Learning analysis, it is better to buy a pen over GPS – penumbra vs gap – which provides more detail about how we arrive at these numbers.
While PEN stock may outperform GPS, the COVID-19 crisis has created several pricing discontinuities that could provide lucrative trading opportunities. For example, you’d be surprised how intuitive it is to approach stock valuations. target vs willowLiams-Sonoma
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