Bioventus Surges 73% in Three Months: Time to Buy the Stock?

Core Viewpoint - Bioventus (BVS) has experienced a significant stock price increase of 73% over the past three months, outperforming the industry and the S&P 500, driven by strong sales performance and improved financial guidance for 2024 [1][2][4]. Group 1: Stock Performance - BVS shares have surged 73% in the last three months, compared to the industry's growth of 1.3% [1]. - The stock is trading above both the 50-day and 200-day moving averages, indicating strong momentum [1]. Group 2: Sales and Revenue Growth - The increase in stock price is attributed to encouraging sales performance, particularly in the Pain Treatments and Surgical Solutions segments [2]. - Organic sales grew nearly 14% year over year in Q2 2024, continuing a trend of double-digit growth [3]. - Management has raised the 2024 revenue guidance twice this year, now expecting net sales between $557 million and $567 million, up from the original guidance of $520-$535 million [4]. Group 3: Financial Efficiency and Divestitures - Bioventus is focusing on improving financial efficiency and liquidity by divesting lower-margin businesses, including the sale of its Wound business for $85 million and the Advanced Rehabilitation business for $45 million [5]. - These divestitures are expected to enhance margins and increase cash flow, which can be reinvested into the core business or used to reduce leverage [5]. - Adjusted EBITDA increased by 22% year over year, with adjusted gross margin expanding by 180 basis points to 75.8% [5]. Group 4: Debt Reduction - The company has made significant progress in reducing its debt, bringing it below four times and aiming for less than three times by the end of next year [6]. Group 5: Valuation and Earnings Estimates - BVS is currently trading at a price/sales ratio of 1.52, which is lower than the industry average of 2.17, indicating a potential undervaluation [7]. - Earnings per share estimates for 2024 and 2025 remain consistent at 40 and 45 cents, respectively [8]. Group 6: Investment Recommendation - Given the strong commercial execution and focus on growth, profitability, and liquidity, Bioventus is recommended for addition to investment portfolios, especially as it trades at a discount to the industry [9].