Meme Traders Are Back and One of My Small-Cap Stocks Is Very Hot
Here is an update on a small-cap name that has seen a huge surge in volume.
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Meme stocks are jumping on Monday, with Gamestop GME leading the charge. There is a long list of smaller stocks moving up more than 10%, and speculative traders appear to be gaining confidence. The Russell 2000 small-cap index IWM and the Micro-cap index IWC are both up about 1%.
Small-caps have been acting better for a couple of weeks now, but the main catalyst for the move Monday appears to be the return of "Roaring Kitty" to social media after a three-year absence. He helped to populize the Diamond Hands 2021 meme stock rally, which saw shares of GameStop increase 21-fold over two weeks in January 2021 before a total reversal. GME is currently up 68%, and traders are searching for other names that may ignite one again.
My top small-caps are doing well, but I want to discuss Sensus Healthcare SRTS today. I've mentioned Sensus a number of times, but it has been trading on little volume up until Friday, when it exploded on good earnings.
Sensus Healthcare describes itself as "a medical device company specializing in highly effective, non-invasive, minimally invasive, and cost-effective treatments for both oncological and non-oncological conditions. Sensus offers its proprietary low-energy photon radiotherapy known as superficial radiation therapy (SRT), which is the culmination of more than a decade of research and development to treat non-melanoma skin cancers and keloids with its SRT-100, SRT-100+, and SRT-100 Vision systems. With its portfolio of innovative medical device products, Sensus provides revolutionary treatment options to enhance the quality of life of patients around the world. "
SRTS Imagine Guided Radiotherapy is an alternative to Mohs surgery for treating skin cancer lesions. Radiotherapy is extremely effective and is growing in popularity. SRTS's primary customer is SkinCare Oncology LLC, which partners with physicians to offer skin cancer treatment. It is called GentleCure. GentleCure currently has over 335 practice partners.
Sales of medical equipment are often quite lumpy, and Sensus suffered badly in 2023 as many practices delayed new purchases due to inflation concerns. There has been a shift away from cosmetic dermatology, which is now helping Sensus.
The company posted a strong fourth quarter, with EPS of $0.26 and then surprised with a very strong first quarter of $0.14 versus an estimate for a loss of $0.05. In addition, revenues of $10.7 million were more than double estimates of $4.1 million. Estimates are being revised and are unknown at this time.
On the conference call, the CEO stated, "I think that we can look to Q2 as being as good a quarter. I can't tell you if it's going to be better, but we're going to drive for it to be as good. We have assembled a significant pipeline of potential customers, so much so that we've ordered more inventory to satisfy anticipated demand by the end of the year." Management is typically quite conservative and prefers not to make estimates.
The company has recently developed a new sales program that it calls a "Far Deal Agreement' in which it shares revenues with physician practices and will provide an ongoing revenue stream. Management anticipants this will pay off substantially starting in 2025.
Sensus is awaiting FDA approval for a new device for TransDermal Infusion. Management stated, "We are still awaiting a response from the agency and are optimistic it will be coming in the second half of this year. We've generated a great deal of interest in our TDI product at trade shows as a work in progress. This system will, for example, allow platelet-rich plasma, or PRP, to be applied to the scalp in a pain-free restoration experience." It is also used to treat hyperhidrosis or overactive sweat glands.
The company has a very strong balance sheet with net current assets of about $2.85 per share and no debt.
Because the company is so small, there is little analyst coverage, but H.C. Wainwright and Maxim increased their price targets on the stock to $10 from $8 after the first-quarter report.
SRTS is usually very thinly traded, but after the surprisingly strong earnings report, it had volume of 19.7 million shares. There were only about 17 million shares issued, so short-term traders were very active. The stock is currently being actively day traded, and that is creating extreme volatility, but that should slow down and help to eventually create opportunities based on what looks like a very good value.
SRTS stock is very hot right now as day traders are active, but they will likely be gone in a few days, and patient investors will find some better long-term entries.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider SRTS to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.
At the time of publication, Rev Shark was long SRTS.
