Semler Scientific (SMLR) is disrupting the Peripheral Arterial Disease(PAD) diagnostics market with their QuantaFlo test offering a mobile, high-value, faster, cheaper, and more accurate in-office test that can be performed by your primary care physician or even a medical aid. Semler has been growing revenues north of 30% annually and that will continue for the foreseeable future. Importantly, even at this nascent stage of market penetration they have strong profitability and have significant leverage on higher revenues, which will continue to drive the stock price higher. The market size is huge encompassing basically anyone over the age of 50 and particularly those with any risk factors for cardiovascular disease such as being overweight, with some like the Mayo Clinic suggesting that upwards of 10% of people over the age of 55 currently have PAD. Meanwhile the diagnosis rate is poor with some estimates suggesting up to 75% of the market remains undiagnosed as the current standard of care, the ankle-brachial index(ABI) test, for front line testing is old-fashioned and low tech and accuracy can vary greatly depending on the skill of the physician conducting the test. The cost of ignorance for both the patient and the healthcare system is high in this market as undiagnosed and untreated PAD can lead to stroke and heart attack among other debilitating outcomes. Semler's solution is right in the fairway of the strong theme that will continue to play out in our healthcare system whereby early detection leads to both better outcomes and lower cost of care. Finally, the float and shares outstanding for this company is very limited leading to significant leverage. This also leads to above average day to day volatility and this recent sell-off, largely driven by the turbulent market has created a tremendous entry point for long term investors. Buy with confidence.
Comment:
Semler is still on sale as many of the lower liquidity names particularly in life sciences have not begun their rebound with the rest of the market yet. Expect this stock to trade better into and out of their earnings report end of October where we can expect continued strong revenue growth and earnings leverage. Continue to buy on weakness.