Financial Analysis: Natus Medical (BABY) versus IRIDEX (IRIX)

Natus Medical (NASDAQ:BABY) and IRIDEX (NASDAQ:IRIX) are both small-cap medical companies, but which is the better investment? We will contrast the two companies based on the strength of their profitability, institutional ownership, earnings, risk, analyst recommendations, valuation and dividends.

Earnings and Valuation

This table compares Natus Medical and IRIDEX’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Natus Medical $500.97 million 2.14 -$20.29 million $1.45 22.08
IRIDEX $41.59 million 1.43 -$12.86 million ($1.11) -4.60

IRIDEX has lower revenue, but higher earnings than Natus Medical. IRIDEX is trading at a lower price-to-earnings ratio than Natus Medical, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Natus Medical and IRIDEX’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Natus Medical -4.16% 11.18% 6.77%
IRIDEX -36.98% -51.61% -38.41%

Institutional and Insider Ownership

96.9% of Natus Medical shares are held by institutional investors. Comparatively, 47.5% of IRIDEX shares are held by institutional investors. 5.5% of Natus Medical shares are held by company insiders. Comparatively, 4.8% of IRIDEX shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Volatility and Risk

Natus Medical has a beta of 0.59, suggesting that its share price is 41% less volatile than the S&P 500. Comparatively, IRIDEX has a beta of 1.68, suggesting that its share price is 68% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of current recommendations and price targets for Natus Medical and IRIDEX, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Natus Medical 0 1 2 0 2.67
IRIDEX 0 0 1 0 3.00

Natus Medical presently has a consensus price target of $44.00, suggesting a potential upside of 37.41%. IRIDEX has a consensus price target of $10.00, suggesting a potential upside of 95.69%. Given IRIDEX’s stronger consensus rating and higher possible upside, analysts plainly believe IRIDEX is more favorable than Natus Medical.

Summary

Natus Medical beats IRIDEX on 10 of the 14 factors compared between the two stocks.

About Natus Medical

Natus Medical Incorporated provides newborn care, neurology, and hearing and balance assessment healthcare products and services worldwide. It offers products and services used for the screening, diagnosis, detection, treatment, monitoring, and tracking of common medical ailments in newborn care, hearing impairment, neurological dysfunction, epilepsy, sleep disorders, neuromuscular diseases, and balance and mobility disorders. The company provides computerized neurodiagnostic systems for audiology, neurology, polysomnography, and neonatology; and software systems for managing and tracking disorders and diseases for public health laboratories. It offers diagnostic electroencephalography (EEG), ambulatory EEG, and long term monitoring, intensive care unit monitoring, electromyography, sleep analysis or polysomnography, intra-operative monitoring, and diagnostic and monitoring transcranial doppler ultrasound technology systems. The company also provides hearing screening products to screen the hearing; diagnostic hearing assessment products to screen for or diagnose hearing loss, or to identify abnormalities affecting the peripheral and central auditory nervous systems; balance and mobility systems to diagnose and assist in treating balance disorders; and thermoregulation products to control the incubators and warmers. In addition, it offers jaundice management products to treat jaundice; brain injury products to diagnose the severity of brain injury; NICVIEW, a live streaming video for families with babies in the neonatal intensive care unit (NICU); and essential products used in the everyday operation of NICU. Further, the company provides computer-based audiological, otoneurologic, and vestibular instrumentation and sound rooms to hearing and balance care professionals. It serves hospitals, clinics, laboratories, physicians, nurses, audiologists, and governmental agencies. Natus Medical Incorporated was founded in 1987 and is headquartered in Pleasanton, California.

About IRIDEX

IRIDEX Corporation, an ophthalmic medical technology company, provides therapeutic based laser systems, delivery devices, and consumable instrumentation to treat sight-threatening eye diseases in ophthalmology. The company offers laser consoles, such as Cyclo G6 laser system for use in the treatment of glaucoma; IQ 532 and IQ 577 laser systems, which are used for the treatment of diabetic macular edema and other retinal diseases; and OcuLight TX, OcuLight SL, OcuLight SLx, OcuLight GL, and OcuLight GLx laser systems, which are used to treat proliferative diabetic retinopathy, macular holes, retinal tears, and detachments. It also provides delivery devices, including TxCell scanning laser delivery system that allows the physician to perform multi-spot pattern scanning; and slit lamp adapter, which allows the physician to utilize a standard slit lamp in diagnosis and treatment procedures. In addition, the company offers MicroPulse P3 Probe, which is used with its Cylco G6 laser system that delivers laser to treat glaucoma; G-Probe, which is used in procedures to treat uncontrolled glaucoma; G-Probe Illuminate and G-Probe Illuminate, which are used in procedures to treat refractory glaucoma; and EndoProbe family of products used in vitrectomy procedures. It serves ophthalmologists, research and teaching hospitals, government installations, surgical centers, hospitals, and office clinics. IRIDEX Corporation markets its products through direct and independent sales force in the United States, as well as through independent distributors internationally. The company was formerly known as IRIS Medical Instruments, Inc. and changed its name to IRIDEX Corporation in November 1995. IRIDEX Corporation was founded in 1989 and is headquartered in Mountain View, California.

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