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Sensus Healthcare: An Unjustified Earnings Selloff

Feb. 14, 2023 5:49 AM ETSensus Healthcare, Inc. (SRTS)35 Comments
Atticus Analysis profile picture
Atticus Analysis


  • Sensus Healthcare quickly fell 30% after a slight miss on Q4 revenue and earnings.
  • Actual numbers were a slight beat and only appeared to be a miss, thanks to unusual circumstances.
  • Sensus has seen unjustified selloffs before, and has rapidly recovered from them.
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Introduction to Sensus

Sensus Healthcare (NASDAQ:SRTS) is a profitable, debt-free, rapidly growing, high-margin, cheaply valued medical device company focused on radiation treatment for skin cancer. I won't be describing the business of Sensus in great detail. Other authors

This article was written by

Atticus Analysis profile picture
Like millions of other investors, I got Robinhood and started trading during the pandemic. Unlike most of those investors, I carefully studied hundreds of earnings reports for clues to future performance, and I was able to identify many future winners, such as OPRX, OTRK, FUBO, and PLUG. My style of investing is identifying key information from earnings transcripts and reports that signify growth.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of SRTS either through stock ownership, options, or other derivatives. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (35)

TenX profile picture
hey, why is the P/E 6.8 right now lol I bought 30K shares today -_-
nsolot profile picture
@TenX Keep in mind that in Q1 of 2022 (last year) they had a one time gain on the sale of the Sculptura IORT asset. Suggest the right number for TTM EPS is 69 cents per share which works out to 7.5X EPS.

You can confirm the 69 cents EPS on the investor deck on their website investor section. Of course trailing 69 cents isn't the same as forward earnings. The analysts seem to be very positive on the outlook.
TenX profile picture
@nsolot I thought it was .77 adjusted not .69 for some reason. Either way, 7.5X is still DIRT CHEAP for a company that just posted 65% top-line growth y/o/y. Even if that isn't sustainiable and they drop to 20% or something, this is still a gross undervaluation.

The first big hit of my career was in an investment just like this actually. Does anyone remember MAKO Surgical? Medical device company that was acquired sometime around 2014 by Stryker. I invested in MAKO in about their 10th quarter of commericialization (robotic hip surgery, following ISRG hype). Stock got massively over-hyped, selling million dollar machines.. like 3 or 4 a quarter, then 6-7 a quarter year over year... in the early days for capital equipment sales things are lumpy. MAKO missed 1 quarter badly, stock was down 40%. Quarter after that was flattish, and the stock got decimated.

I basically put my life savings in MAKO after doing a DCF on their razors and razor blades model, and Stryker bought them out at a 90% premium to trading (115% above my entry point) a few months later.

STRS situation reminds me so much of this its like seeing a ghost. I intend to build the biggest position I have ever built in this company. The only things that make me nervous in this investment are:
(1) A macro-economic shock; something that causes a broad sell off
(2) That this company fails to fetch a more attractive multiple due to lack of recurring revenue built into the model.

2 doesn't scare me that much, but annoyingly caps the potential upside perhaps. I think this is a generational opportunity, but what do I know :)
nsolot profile picture
@TenX Agree it looks very cheap at current price. There actually is a recurring revenue component in that the service contract is approx 10% of the selling price, and since it is an X-ray device, it needs to be serviced annually.

I'm adding also.
Thiede Value Investing profile picture
Does anyone know who sensus healthcare main customer is??? They are 73% of 2022 revenue. Is it a distribution partner?
nsolot profile picture
@Thiede Value Investing That's not a secret. It's Skincure Oncology:


They also have a website targeting patients, called Gentle Cure

Thiede Value Investing profile picture
@nsolot Thank you so much, Skincure oncology sounds like they are buying the machines from senses and offering the fair market leases.
Sco seems like and marketing and finance organization.

Anyone have thoughts?
Thiede Value Investing profile picture
@nsolot this business model looks even better to some when they outsource the manufacturing (supply) and outsource the salesforce and marketing and financing (downstream).
It makes them almost just a patent holder and r&d company on the device which is why they are getting the outsized margins and high ROIC/ROE.
I can only say from a PATIENT experience that the Sensus treatment is far superior to MOHS surgery for skin cancers. I went out and bought shares after my treatments cured my skin cancers and left no scarring or after effects. I think every decent sized dermatologist office should offer this form of patient care and I’m staying long and hopeful with my shares.
nsolot profile picture
@mkprbint Thanks for sharing! While I have not had NMSC, my very good friend has had BCC a few times (at least 3). Once he had Mohs, and it got infected. Th second time he had SRT and liked it much better. I think he is currently undergoing a course of treatments as he sent me a photo from the Derms office just a few days ago.

I agree, this should (and will eventually) be offered by more & more Derms.
Excellent write up-thank you!
More bad selling this morning? Looked in a few places but didn’t see any news. Would have assumed 2023 would have been a banner growth year coming out of the pandemic and skin cancer treatments getting back to normal frequency.
Atticus Analysis profile picture
@tigerpaw75 I have spent a lot of time looking, too. No news I can find. Growth seems fine. But the selling has been extremely high volume, which is always very concerning on no news. What's more, the high volume, selling all day stuff has happened across multiple days now, without a peep from management. Great time to announce a buyback or do some insider buys! So I feel like this has been poorly handled by them, and stresses out us shareholders.

The one critique I keep hearing about $SRTS is the capital equipment model - very little recurring revenue. That may justify giving SRTS a lower multiplier than other stocks in the sector, but SRTS was already trading at a very cheap valuation before the selloff, and nothing recently has changed about that model.
@Atticus Analysis The selling on high volume without news has been concerning and definitely insiders should dip their pockets for these prices.

I think the capital equipment model critique doesn't hold anymore to me. Check Iradimed (IRMD), seems to be a capital equipment model business (verify yourself) and holds higher multiples on all metrics (P/S, P/E etc)
@Atticus Analysis thanks for your comments
Thelonius23 profile picture
Why doesn’t SRTS merge with SCO (who currently buys 50% of their product)? Seems like the only reason SCO exists is to sell SRTS products. So why not merge the two into a single co? SCO seems like it’s just an outsourced salesforce for Sensus. I’m sure they must give up a lot of economics for having that arrangement with a third party instead of having the salesforce in-house.
"Largest Holding"(???)

Wow................you have stones, Sir!
AlphaMove profile picture
Agree with all points made. I am still baffled by why the market despises this stock. Is it because it is a capital equipment model? Is it because the market does not think the technology is worth much value? or anything else...?
I would love to hear from people who are scared from the stock, or short it, or aren't excited about it, or are not willing to pay an average P/E for their growth and healthy margins, etc. to explain rationally why they think so.
@AlphaMove on twitter chatted with someone and he said market generally doesn't like capital equipment model, he didn't elaborate. Though there are various other stocks like Iradimed that trade at high multiples but not sure if they're capital equipment models?
nsolot profile picture
@BasilII I may be way off, but my observation is the "new breed" of traders is looking for everything SRTS is not. They want:

1) High short interest
2) High leverage
3) Low float (arguably SRTS is low float, but if they levered the balance sheet, they could buy in a lot of shares)
4) Unprofitable (yup, I said it, losses are better)
5) Firing employees instead of hiring to grow the biz
6) Near bankrupt (e.g. BBBY, HRZ, AMC, etc.)
7) The company puts out an constant stream of PRs, sometimes 2 or 3 a week.
8) ... and so on.

In general, I think the market prefers a pill to a device, but medical devices are big business, and there have been some deals. One in particular, Soliton bought by Allergan (Abbvie) in 2021 for $550 million


SRTS is one of the most underfollowed stocks I've seen in years.

My $0.02
@nsolot haha i got you, but a pill usually has a lot of side effects and something that is as effective as SRT in a trail has still to come out.
You said it Soliton got bought out. Generally Medtech is less favoured than biotech but take a look at Iradimed, it's profitable medtech with high multiples. Could also be since the low markep cap, it doesn't attract the institutionals. Management needs to dip at these level, buy on the open market with their personal money.
astute pathways profile picture
Are you Atticus from calif. that did commodities? If so, i was one of your clients
nearly agreed with everything you said - except with this "Sensus also promised to do another share buyback if shares fall to distressed levels, which clearly has happened." I don't recall them saying this.
Atticus Analysis profile picture
@BasilII Here is the section:
"Joseph Sardano

We went to the Board and the Board was more than happy to provide us with $3 million to repurchase our shares. We did that. To the fullest extent, we spent the 3 million shares. We think that we were as good as investors as anybody else in getting those shares at a very decent price, and we think the best investment is in our own company. And so is the opportunity out there in the future? I think the Board is always open to making things like that happen, and we'll definitely look at it if that opportunity should come across again."
@Atticus Analysis ah ok fair enough but that doesn't sound it's happening to dive in.
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