High-tech cosmetic stock InMode is filling in a new base and heading toward a buy point. Its picking up traction quickly this week and is Thursday's IBD 50 Stocks To Watch pick.
INMD was recently added to the elite IBD 50 list.
The medical technology company sells minimally-invasive tools that use radio frequency to remodel how the body stores fat. It offers skin-tightening procedures and has branched into plastic surgery, gynecology, dermatology, otolaryngology and ophthalmology services.
The Israel-based provider holds the top spot out of 75 stocks in the Medical-Systems/Equipment industry group, which is ranked 66th out of 197 IBD industry groups. It has moved up from 98th place four weeks ago.
High-Tech Cosmetic Stock Works Toward Buy Point
The high-tech cosmetic stock is forming the right side of a cup base with a 41.94 buy point, according to MarketSmith. The new base formed out of an undefined base with a 40.39 by point that began in November.
The cup formed after better-than-expected earnings and sales on Feb. 14. The stock rose over 10% for two days and rolled over. Shares dropped below the 50-day and 200-day moving averages before bottoming out, forming the bottom of the cup.
InMode got a lift in March after UBS initiated coverage with a buy rating and 40 price target. Shares climbed higher, reclaiming the 50-day line Monday with a 4.5% gain in higher than average volume.
INMD added another 5.1% Wednesday in heavy volume after Q1 EPS and sales guidance exceeding FactSet's estimates and have gained over 12% this week.
However, the stock has a long way to go to reach the 99.27 all-time high posted in November 2021.
InMode shares started trading on the Nasdaq in August 2019. According to William O'Neil's "How to Make Money in Stocks", big winners often come within one to eight or 10 years of their initial public offerings (IPO).
20% Or More Earnings Growth
Management raised Q1 guidance to 50 to 51 cents per share, exceeding 46 cent estimates, while projecting sales between $105.7 million and $105.9 million, above FactSet's $100.3 million estimate.
Q4 EPS growth accelerated to 22%, from 20% and 16% in the prior two quarters. The "C" in the CAN SLIM investing strategy looks for accelerating current EPS growth of at least 18% to 20%, and ideally 25% or more, therefore INMD meets the criteria. However, sales growth slowed to 21% in Q4, from 29% and 30%, marking a red flag.
Analysts forecast a 1% dip in 2023 earnings, followed by a 14% surge next year/
InMode reports Q1 earnings on May 2.
Management Has Skin In The Game
Management owns 27% of the high-tech cosmetic stock, a positive sign, as leaders have a vested interest in its success. Mutual funds own 44%, with increasing ownership in the last two quarters.
Finally, InMode holds near-perfect 98 out of 99 IBD EPS and Composite Ratings.
Follow Kimberley Koenig for more stock news on Twitter @IBD_KKoenig.
