Is This Undervalued Medical Stock Poised for a Breakout?

Sometimes, we fail to see the forest for the trees. That certainly seems to have been the case with how the financial markets treated medical device company LivaNova (NASDAQ: LIVN) in 2024. Sure, the business winded down one of its segments, and had a failed clinical study — but all the while, solid earnings reports were coming in.

Ultimately, those two issues proved to be of little consequence when it came to the stock’s growth prospects. On top of that, the fact that it saw a 10.49% decline in price in 2024 seems to have made it all the more attractive.

Our Zen Rating system takes into account 115 factors and distills them down into a simple rating. Stocks rated A fall in the top 5% of equities, while a B rating tells you that a stock is in the top 20%. The rest…well, why would you focus on them when you could focus on the cream of the crop?

LivaNova stock belongs to the most exclusive category. With a Zen Rating of A, it belongs to a class of equities that have, on average, beat the market with average annual returns of 32.52% since the turn of the millennium.  

That Zen Rating doesn’t just correlate with above-average returns — it puts LIVN stock in an exclusive category. To be precise, in the top 5% of the more than 4,600 stocks that we track.

Well, as great as that sounds, it isn’t worth much without placing everything in the proper context. To get an overall Zen Rating, a stock is graded in 7 different categories, which we call Component Grades.

In the case of LivaNova stock, two things jump out at you quickly — the Value and Growth ratings, both of which are A. 

In terms of its Value rating, LIVN scores in the top 5% of all equities. For its Growth rating, the result is even more impressive, as it ranks in the top 3%.

However, don’t let those B Component Grade ratings fool you — in terms of Sentiment and Safety, LIVN also ranks in the 93rd and 94th percentile, respectively.

So, what does this tell us? In short, this is potentially quite an undervalued stock, especially relative to its growth potential. A closer look at some key financial metrics confirms this view. The stock’s price-to-earnings growth (PEG) ratio stands at just 0.64x — a far cry from the 1x that, at least theoretically, represents a perfectly valued stock.

Now, let’s take a closer look at those growth prospects. LIVN’s earnings are forecast to grow at a rate of 186.44% per year. In contrast, the U.S. medical device industry’s average forecast growth? A paltry (at least in comparison) 38.71%. For the wider market, analysts predict average earnings growth of 27.13% on an annual basis.

There are also a couple of bullish catalysts at play. In November, the company reported that the clinical trial for its novel sleep apnea implant met primary safety and efficacy endpoints. In addition, in January 2025, one of the company’s chief rivals Getinge, announced that it would exit the cardiopulmonary surgical perfusion market. 

LivaNova is a crucial supplier of these machines, used in open heart surgeries — so it is well-positioned to take advantage of the vacuum and expand its market share.

Lastly — LivaNova has managed to beat earnings per share (EPS) estimates for nine consecutive quarters in a row. The medical device business will hold its next earnings call on Tuesday, February 25 — so if your interest has been piqued, add the stock to your watchlist.

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