Haemonetics’s 21.4% return over the past six months has outpaced the S&P 500 by 15.6%, and its stock price has climbed to $65.64 per share. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is there a buying opportunity in Haemonetics, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Haemonetics Not Exciting?
We’re glad investors have benefited from the price increase, but we're swiping left on Haemonetics for now. Here are three reasons you should be careful with HAE and a stock we'd rather own.
1. Slow Organic Growth Suggests Waning Demand In Core Business
In addition to reported revenue, organic revenue is a useful data point for analyzing Medical Devices & Supplies - Specialty companies. 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 3.6% 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 $1.32 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. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Haemonetics historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6.6%, somewhat low compared to the best healthcare companies that consistently pump out 20%+.
Final Judgment
Haemonetics isn’t a terrible business, but it doesn’t pass our quality test. With its shares topping the market in recent months, the stock trades at 12.4× forward P/E (or $65.64 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are more exciting stocks to buy at the moment. Let us point you toward the most dominant software business in the world.
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