Meme Traders Return: Spotlight on Sensus Healthcare’s Surge

TipsForTraders | May 14, 2024

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Meme stocks surged on Monday, led by a notable rally in GameStop (GME). Smaller stocks also experienced significant gains, with some climbing over 10%, reflecting a resurgence in speculative trading confidence. This uptick is mirrored in indices like the Russell 2000 (IWM) and the Micro-cap index (IWC), which both rose approximately 1%.

This wave of enthusiasm in the small-cap sector has been building over the past few weeks, reaching a peak with the return of “Roaring Kitty” to the social media scene. After a three-year hiatus, his comeback has reinvigorated interest in meme stocks, reminiscent of the 2021 rally that catapulted GameStop shares. Presently, GME has surged by 68%, with traders eagerly hunting for other potential breakout candidates.

Turning to one of the specific small-cap stocks that have garnered attention, Sensus Healthcare (SRTS) stands out. Despite trading quietly on low volume until recently, Sensus saw a spike following robust earnings results. As a company, Sensus Healthcare is dedicated to developing non-invasive treatments for both oncological and non-oncological conditions through its innovative medical devices like the SRT-100 systems. These systems offer a compelling alternative to traditional surgeries for skin cancer, boasting over 335 partnering practices under the GentleCure banner.

Despite challenges in 2023, where economic pressures led many practices to defer purchases, a shift towards essential dermatological treatments has proven beneficial for Sensus. The company recently reported impressive earnings, with a fourth-quarter EPS of $0.26 and a surprising first-quarter performance of $0.14 per share against expected losses. Additionally, revenue reached $10.7 million, significantly surpassing the $4.1 million forecast. This has led to a reevaluation of financial estimates, although exact figures are currently under revision.

In the recent earnings call, the CEO conveyed cautious optimism about the company’s prospects, highlighting a substantial pipeline of potential customers which prompted an increase in inventory to meet anticipated year-end demand. The introduction of a new sales model, the “Far Deal Agreement”, is expected to create a consistent revenue stream, with significant financial benefits projected for 2025.

Moreover, Sensus is in the process of securing FDA approval for a novel TransDermal Infusion device. This device aims to revolutionize treatments like platelet-rich plasma applications to the scalp and therapies for hyperhidrosis, enhancing patient experience through non-invasive techniques.

Sensus boasts a solid financial foundation with a strong balance sheet, featuring net current assets of approximately $2.85 per share and no outstanding debt. Although analyst coverage is limited due to the company’s size, recent performance has led to revised price targets from analysts at H.C. Wainwright and Maxim, lifting their projections to $10 from an earlier $8.

Despite its low trading volume historically, Sensus experienced an explosion of activity with 19.7 million shares traded following its earnings release. This heavy trading volume, nearly equal to the number of shares outstanding, indicates a high level of engagement from short-term traders. Although this has introduced volatility, it also presents potential entry points for long-term investors.

In conclusion, while SRTS is currently experiencing heightened activity and volatility due to speculative trading, the underlying fundamentals and innovative advancements suggest that patient investors could find rewarding opportunities as the frenzy subsides. As the dust settles, Sensus Healthcare may offer a compelling value proposition for those looking for growth in the medical device sector.