Buy this unstoppable growth stock instead of NFTs in 2022
Non-fungible tokens (NFTs) are among the hottest ultra-speculative assets in 2022. Everything from cartoon monkeys to social media posts can be minted and sold – often to buyers with high expectations about to the future value of their tokens.
As cool as NFTs are, they are currently among the riskiest assets on the market. For investors looking for a way to inject growth into their portfolios, NFTs are obviously very tempting, but I have a proposition that might accomplish the same goal more effectively. And it is to buy shares of InMode (NASDAQ: INMD) instead of NFTs.
Why This Stock Is Better Than Buying NFT
InMode is an Israeli company that develops and sells devices for skin tightening, body contouring and other outpatient medical aesthetic applications. The hardware in its portfolio performs a handful of different cosmetic procedures using radio frequency radiation, including procedures that may typically require specialized laser treatment or even plastic surgery.
Unlike cosmetic surgeries, the company’s equipment is much less invasive, which means there’s less friction for new clients. And it’s even able to increase the effectiveness of traditional procedures like liposuction, an industry that’s expected to be worth $1.2 billion globally by 2026, according to Grandview Research.
According to management, the demand for advanced aesthetic treatments with the company’s devices is increasing over time as consumers avoid more invasive treatments like plastic surgery and clinicians seek to offer a wider range of services. This means it will sell more units and additional consumables like replacement handheld tool heads and adapters, which are needed to deliver certain treatments.
According to a report by JaguarAnalytics, InMode’s total addressable market is around $3.5 billion, so there’s plenty of room to grow its revenue by $322.21 million. Additionally, its razor and blade sales business model ensures that each new device installed in a clinic will generate recurring revenue through maintenance contracts and spare parts.
Over the past three years, InMode’s business has exploded, with quarterly revenue skyrocketing 208.2% and quarterly net profit increasing 341.7%. Thanks to this exceptional performance, the company was able to increase its research and development (R&D) expenditure by 105.9% during the same period.
This means that there is an ever-increasing amount of work being done to develop new capable systems and thereby increase its total addressable market. And that work is no doubt how management is confident that it will continue to come out with a pair of new pieces of gear every year going forward.
To top it off, InMode’s profit margin of 46.06% is pretty solid and it only has $3.55 million in debt. Nothing stands in the way of future growth investments hitting 11. And that’s one more reason why his stock has grown over 602% in the past three years.
It’s almost on sale
If InMode’s recent financial performance isn’t enough to convince you that it’s a better buy than an NFT, there’s also its valuation to consider.
The problem with NFTs is that it is remarkably difficult to assign a value to them, as it is a very subjective judgment, much like valuing works of art. Moreover, the NFTs themselves do not have any agency with which they could modify their own characteristics and thus become more valuable. In other words, if you buy an NFT that other people don’t consider valuable, there’s little chance your fortunes will ever change.
Unlike NFTs, you don’t need to worry about whether you’re getting value for money with InMode shares, or worry about whether management is capable of increasing the value of the company with successful investments in growth. The average price/earnings multiple for the medical device industry is close to 40, and InMode has a P/E of 27.42.
InMode’s shares are valued a bit lower than the average for companies in its industry, even though it has enormous growth potential. And thanks to the ongoing market correction, there’s even a chance that InMode will be an even better bargain tomorrow than it is today.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.