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Cutera's Torrid Run Seems To Leave Little Room For More Upside

Apr. 06, 2018 10:29 AM ETCutera, Inc. (CUTR)4 Comments
Vince Martin profile picture
Vince Martin


  • CUTR has skyrocketed, gaining 169% in the last year and 390% in the last two.
  • As one of the last independent energy-based aesthetics companies available, M&A speculation at least in part is fueling the gains.
  • Performance has been better - but CUTR looks more than fully valued relative to recent growth and there are some concerns the market appears to be ignoring.
  • CUTR looks like a dangerous short - but at some point, it would seem to be wise to take some money off the table here.

The energy-based aesthetics space saw a burst of M&A activity in early 2017 - but Cutera (NASDAQ:CUTR) stayed independent. Last February, ZELTIQ Aesthetics (ZLTQ) sold itself to Allergan (AGN), and the next day, Cynosure (CYNO) agreed to a takeover by Hologic (HOLX). Two months later, long-struggling Syneron went private.

That decision certainly looks pretty wise at the moment:

ChartCUTR data by YCharts

chart since January 1, 2017

CUTR has tripled since the start of 2017. A banner year has been a big driver. But the fact that Cutera is basically the last US-based energy-based aesthetics player left standing also helps. With CUTR trading at ~50x 2018 EPS and 46x EV/EBITDA (both multiples based on the midpoint of 2018 guidance), there seems to be at least some M&A premium built in here.

And at this point, I'd argue that there's likely too much premium. Cutera has a solid story, and is coming off a strong year. The space as a whole is benefiting from increased sales to non-specialty offices looking for cash sales. But valuation matters, and with growth solid but not spectacular, it's getting increasingly difficult to see much more in the way of upside for CUTR.

A Banner 2017

To be sure, Cutera had a phenomenal 2017. The company's original guidance for the year projected, at the midpoint, $137.5 million in revenue and $0.45-$0.50 in EPS. Cutera actually delivered $151.5 million in sales and $0.93 in adjusted EPS - even with a Q1 that missed consensus on the bottom line.

For the year, revenue rose 28% year-over-year. The launch of truSculpt 3D, the company's body-contouring product, was a major driver, per the 10-K and conference call commentary. But enlighten (used for tattoo removal and to treat pigmented lesions), excel HR (hair removal), and xeo (skin

This article was written by

Vince Martin profile picture
Overlooked Alpha launched April 2022 - subscribe at overlookedalpha.com. Some OA articles are also available here at Seeking Alpha.I've been contributing to Seeking Alpha and other investment websites since 2011, with a general (though far from rigid) focus on value over growth. I got my Series 7 and 63 back in 1999, and watched the dot-com bubble peak and then burst in real time at a small, tech-focused retail brokerage in NYC.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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