SANUWAVE Health (OTCQB: SNWV) is trading at ridiculously low levels for a company expected to generate upwards of $25 million in 2021. Its imminent uplist to a more senior NASDAQ exchange combined with offering a best-in-class foot ulcer treatment in UltraMIST and dermaPACE add fuel to that argument.
Better still, record-revenues, along with guidance to expect more of the same in the coming quarters, puts the company in its potentially best operating position in its history. Thus, the share price consolidation over the past six months at the $0.20 levels makes little sense to seasoned investors. Moreover, with investors learning much about how institutional traders can control stock prices, ala Reddit, the lid on SNWV stock will likely be blown off after the markets officially recognize the company’s transformational year in 2020. Too many good things happened for SNWV to only own a market cap of roughly $77 million.
Record revenues, an imminent NASDAQ listing, and an expected $25 million in revenues certainly set the stage for higher prices.
Analyst See Massive Gains
The start of the move higher could come soon, with SNWV getting set to announce its Q4 numbers. Expectations are for the company to generate another record-setting quarter with revenues likely to breach $3 million. A pre-announcement of those results might help start the wave. But if they don’t, analysts at Lake Street Capital offered a bullish thesis for why results are expected to be strong. In fact, strong enough for Lake Street to suggest an increase of roughly 415% gain in YoY revenues. If posted, it could be a powerful motivator for investors to bid the stock higher.
In fact, if investors stay focused on the company’s substantial achievements in just the past few months, instead of the fog surrounding the consolidating trades, they might soon benefit from closing the valuation gap that has been plaguing the stock. And whether using methodological or quantitative valuation models, investors have a few aces on its side- a planned uplist, record revenues, expanding sales, and potentially more deals in the making. They all lead to one thing- a higher share price.
Thus, while it’s frustrating to watch a stock churn at depressed levels despite a plethora of value-creating accomplishments, having patience in this trade may soon pay off.
NASDAQ Listing Imminent
The most-anticipated and expected near-term catalyst is for SNWV to secure its uplisting to a more senior NASDAQ exchange. Although this uplisting has taken more time to complete than many investors expected, several reasons could be playing a role, with COVID-19 being one of them. But for whatever reason, the process is running its course, and there is little reason to doubt that the company is anything but diligent in fulfilling any and all requests made by the regulatory overseers. The great news is that investors do know through filings that SANUWAVE is well into the process.
Better still, by analyzing the published financials and assuming guidance is accurate, SANUWAVE is assuredly in compliance to meet and exceed minimum standards for each exchange. Again, surging revenues, new assets added to its pipeline, a planned reverse-split, and an increase to its balance sheet and shareholder equity ledgers all will contribute toward the expected approval. The good news is that much of the legwork was completed in Q3 of 2020. Q4 should turn out to be even stronger.
A Catalyst After The Uplist- Revenues
Another catalyst, perhaps before the uplist is official, could result from a second consecutive set of record revenues. The expected record-setting revenue performance comes via SNWV’s transformational acquisition of Celularity’s UltraMIST ultrasound healing therapy.
Revenue growth in 2020 was exceptional. In its Q3 report, the company posted a record-setting quarter with revenues surging by more than 895% compared to the same quarter last year. Those strong results are expected to be bested in the current quarter, with its more than 100 person sales force expected to drive roughly $3 million in new revenues in Q4. If SNWV hits its target, it will result in an approximately 415% gain in year-over-year revenues. That’s just for starters.
The company has also fully integrated its more than 100 person sales team, causing analysts currently covering the company to expect enormous growth in 2021 revenues. In fact, they estimate a 2021 yearly run-rate of $25 million based on the products already in the SANUWAVE arsenal. If they add additional assets, that number will grow.
Lake Street Capital is bullish on the existing product lineup. From their report, they said,
“Following record Q3 revenue, SNWV expects Q4 product revenue up approximately 50% sequentially. As a result of the strong Q3, we are increasing our FY20 revenue estimate to $5.2M vs. our previous $4.3M…We are leaving our FY21 revenue estimate unchanged at $25.1M.”
Keep in mind that their bullishness comes from a historical perspective and is far less of a projection. UltraMIST® delivered more than $15 million in sales last year and provided more than $4 million in EBITDA earnings. Notably, those numbers are immediately accretive. However, accounting for UltraMIST without adding the value from SANUWAVE’s flagship device, dermaPACE, leaves money on the table.
In fact, the proper way to look at the improved SANUWAVE is to combine the known and potential revenues from both devices, which show not only its revenues but also the value from combining to become a best-in-class painless treatment alternative to patients with chronic diabetic wounds. It’s a tandem treatment that works exceptionally well together, making it likely that they can be sold together. And, with reimbursement coverage being earned for each, a tandem sale can generate multiple times the revenues. Most recently, SANUWAVE announced that reimbursement coverage continues to grow. That translates to more use by treating physicians.
Don’t forget that SNWV is targeting a massive market that is certainly not shrinking.
Diabetic Foot Ulcer Market Is An $11.4 Billion Opportunity
SANUWAVE executed well on a strategy to acquire complementary devices that position the company as a market-leading treatment provider in a diabetic wound-care market. Their focus toward the treatment of foot ulcers alone is an $11.4 billion opportunity. UltraMIST, especially in combination with dermaPACE, made SNWV considerably more powerful in the sector. And the proof of its value is already evident by contributing to the surge in revenues. But, those results can get better by entering new markets.
A wild-card catalyst can come from expansion into the Latin markets. These new revenue-generating opportunities can be a springboard to expanding its global reach.
SANUWAVE received a jump-start into the Latin markets by announcing its receipt of regulatory approval from COFEPRIS, the Mexico equivalent of the FDA, to market and distribute dermaPACE® to treat chronic wounds. SANUWAVE has already suggested that opportunities in that market can materialize through Joint Venture opportunities to deliver substantial, non-dilutive revenues. Upfront fees and royalty agreements with strong third-party partners could be a value driver in that market.
A second valuable opportunity for SANUWAVE is from capitalizing on its ANVISA approval to market dermaPACE® to treat chronic wounds in Brazil. Like Mexico, that market is substantial and can serve a dual role to expedite the treatments reach to additional countries.
Thus, although the Lake Street reports provided some color into these markets, there may be room for far more growth than has been given credit thus far. One thing that investors should not do is to leave these exceptionally large treatment markets out of the revenue-generating equation. That again would be ignoring a potentially massive source of revenue.
Also, if those markets take off, company updates in the early part of 2021 could help raise the guidance beyond the stated $25 million expected. Revisions higher are usually met with higher valuations, which would play directly to SANUWAVE’s favor.
Seizing Catalyst Potential Early
Yes, frustration is part of investing. And most certainly, the markets have been slow to realize the impact of the company’s recent acquisitions and licensing agreements. Maybe it’s fair to speculate that some investors are willing to wait for the uplist to finalize before committing to a position. That could be a huge mistake. Or, maybe the stall in price appreciation is that institutional investors are often limited from purchasing the stock on the OTC exchange and at its price level. But that’s not to say they aren’t watching the developments closely. They should be, too.
Institutional money helped secure the UltraMIST acquisition by arranging for SANUWAVE to receive more than $20 million to close the purchase. They likely want to see their investment grow. A more cynical view by investors believes that the stock is being held at current levels by design. And after the week with Reddit, that’s a sure possibility.
After all, it doesn’t take much volume to keep the share price range-bound ahead of potential catalysts. And if a particular class of investors wants to be involved in what they believe will be an inevitable move, it’s not too difficult to keep a relatively low-volume stock range-bound. If that is the case, it may soon become more costly to employ that strategy. As is often the case, news trumps all. And if the news is record-setting, the least path of resistance is usually higher.
To those evaluating a position in SANUWAVE, the prognosis is excellent. The company posted record revenues and is expected to do so again when they announce Q4 results. That on its own creates value. But, by factoring in the value from its planned uplist, more record revenues, and a fierce sales team that is attacking their markets, the combination of anticipated events could provide a springboard effect for the stock to move higher… quickly.
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