T’was the trading week of Christmas, insider trading was quiet, what did you expect? However, a STAAR did shine bright.
Broadwood Capital is one of STAAR Surgical Company’s (STAA) largest shareholders, owning more than 10% of the company. As a result, Broadwood and its President, Neal Bradsher, are considered insiders. Normally, we don’t pay too much attention to institutional buying and selling, unless it’s somebody like Warren Buffett or a firm with a solid history of being on the right side of the trade.
STAAR Surgical designs, develops, manufactures, markets, and sells implantable lenses for the eye, and companion delivery systems to deliver the lenses into the eye. The company provides Visian implantable Collamer lens product family (ICLs) to treat visual disorders, such as myopia, hyperopia, astigmatism, and presbyopia; and Hyperopic ICL, which treats far-sightedness.
The medical instruments and supplies company also offers preloaded silicone cataract intraocular lenses and injector systems for use in cataract surgery. In addition, the company sells injector parts, and other related instruments and devices. It markets its products to health care providers, including ophthalmic surgeons, vision and surgical centers, hospitals, government facilities, and distributors, as well as products are primarily used by ophthalmologists.
Last week, Bradsher and Broadwood Capital purchased 191,075 shares of STAA at $47.42 per share for a total investment of a little more than $9 million. It’s the first buy after a string of 10 consecutive sells, ranging from $89.28 to $156.06. All in all, they sold 1,985,666 shares from January 2021 through June 2021, collecting nearly a quarter-billion dollars. (1)
Prior to a run on selling, Broadwood accumulated 7,345,001 shares of STAA with 52 straight buys, investing $37.4 million. They started acquiring the California-based company in June 2007 and continued on their bullish path until May 2019 with prices ranging from $1.71 to $22.23 per share.
While Bradsher and Broadwood Capital are not Warren Buffett and Berkshire Hathaway, their STAA performance is one that Buffett could appreciate. According to Wall Street’s consensus one-year price target of $80.22 per share (2), Bradsher and Broadwood Capital could add to their track record of success investing in STAAR Surgical. Perhaps.
For the year ahead, analysts expect the company to earn $1.02 per share (EPS), up from $0.71 in 2022. Sales are also slated to increase, rising more than 24 percent to the consensus view of $355.49 million in the next 12 months from $285.35 million last year. (3)
During the last half-decade, STAAR traded with elevated valuations. Its average price to earnings (P/E) multiple was 89.91 (low 59.95) and the average price to sales (P/S) number was 16.43 (low 5.93). Both are considerably higher than the typical peers’ P/E of 27.80 and P/S ratio of 1.46.
Overall: To hit Wall Street’s consensus price target, STAA would need to trade at 78.65 times the earnings’ forecast of $1.02 or at 10.88 times projected 2023 sales of $355.49 million. Both metrics are within the medical company’s recent valuation ranges but could be on the high side for investors with average risk tolerance.
Broadwood Capital’s record of being on the right side of STAAR Surgical Company’s (STAA) is encouraging, but it is noteworthy that the investment company built a position in the company for more than a decade before selling.
As such, STAA is only appropriate for aggressive investors with a long-term, maybe really long, time horizon.
1 – https://www.secform4.com/insider-trading/1278388.htm
2 – https://finance.yahoo.com/quote/STAA?p=STAA
3 – https://finance.yahoo.com/quote/STAA/analysis?p=STAA