Although Haemonetics (currently trading at $74.04 per share) has gained 6.7% over the last six months, it has trailed the S&P 500’s 13% return during that period. This may have investors wondering how to approach the situation.
Is now the time to buy Haemonetics, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free for active Edge members.
Why Is Haemonetics Not Exciting?
We're cautious about Haemonetics. Here are three reasons why HAE doesn't excite us and a stock we'd rather own.
1. Slow Organic Growth Suggests Waning Demand In Core Business
Investors interested in Medical Devices & Supplies - Specialty companies should track organic revenue in addition to reported revenue. This metric gives visibility into Haemonetics’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Haemonetics’s organic revenue averaged 3.1% year-on-year growth. This performance slightly lagged the sector and suggests it may need to improve its products, pricing, or go-to-market strategy, which can add an extra layer of complexity to its operations. 
2. Fewer Distribution Channels Limit its Ceiling
Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.
With just $1.33 billion in revenue over the past 12 months, Haemonetics is a small company in an industry where scale matters. This makes it difficult to build trust with customers because healthcare is heavily regulated, complex, and resource-intensive.
3. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Haemonetics’s revenue to rise by 1.6%, a slight deceleration versus its 8% annualized growth for the past five years. This projection is underwhelming and suggests its products and services will face some demand challenges.
Final Judgment
Haemonetics isn’t a terrible business, but it doesn’t pass our quality test. With its shares lagging the market recently, the stock trades at 14.2× forward P/E (or $74.04 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now. Let us point you toward a safe-and-steady industrials business benefiting from an upgrade cycle.
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