Leading dental lasers provider BIOLASE, Inc. (BIOL) in Irvine, Calif., has sold more than 41,200 laser systems across 90 countries worldwide. Its revenue increased nearly 46% in its last reported quarter. And the company said on Nov. 10 that it is likely to continue experiencing high demand for its dental lasers in the fourth quarter. Also, its fourth-quarter revenue is expected to surpass its $10.20 million pre-pandemic revenue in the fourth quarter of its fiscal 2019.

BIOL’s shares surged in price on Nov. 24, 2021, after the NASDAQ stock market granted the company until May 23, 2022, to regain compliance with the exchange’s minimum bid price requirement.

However, the stock has declined 27.9% in price over the past three months and 35.3% over the past six months to close yesterday’s trading session at $0.44. BIOL suddenly canceled its special stockholders' meeting, originally scheduled for Nov. 19, 2021, to discuss a potential reverse stock split. So, BIOL’s near-term prospects look uncertain.

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Here is what could shape BIOL’s performance in the near term:

Positive Developments

BIOL announced a clinical advisory partnership with Dr. L. Stephen Buchanan on Aug.31, 2021, to help expand laser adoption and increase direct training programs with one of the global leaders in endodontics. In June 2021, the company announced recent data published in two journals—the International Journal of Periodontics & Restorative Dentistry and Lasers in Medical Science—demonstrated how ‘Waterlase Er,Cr:YSGG’ laser technology can be beneficial to treat peri-implantitis in patients suffering from the inflammatory disease.

Mixed Financials

For the third quarter, ended Sept. 30, 2021, BIOL’s net revenue increased 45.8% year-over-year to $9.53 million. The company’s laser system sales increased 64% year-over-year, while its consumables and other revenue increased 21% year-over-year.

However, its net loss came in at $3.28 million versus $12,000 in income in the year-ago period. Its loss per share was $0.02 compared to $0.21 in the prior-year quarter. Also, its adjusted EBITDA came in at a negative $2.45 million, versus $2.47 million in the year-ago period.

Poor Profitability

In terms of trailing-12-month gross profit margin, BIOL’s 35.49% is 35.9% lower than the 55.38% industry average. Likewise, the stock’s trailing-12-month EBIT and EBITDA margins are negative compare with the 2.38% and 5.96% respective industry averages. Also, its 1.17% trailing-12-month CAPEX/S is 70.2% lower than the 3.93% industry average.

POWR Ratings Don’t Indicate Enough Upside

BIOL has an overall C rating, which equates to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight distinct categories. BIOL has a C grade for Momentum, which is consistent with its 35.3% loss over the past six months and 47% decline over the past nine months.

The stock has a D grade for Stability, which is in sync with its 1.47 beta. It has a D grade for Quality, which is consistent with its lower-than-industry profitability ratios.

BIOL is ranked #99 of 173 stocks in the Medical - Devices & Equipment industry. Beyond what I have stated above, we have given the stock grades for Value, Growth, and Sentiment. Click here to get all BIOL’s ratings.

Bottom Line

Micro-cap BIOL received a 180-day extension in Nov. 2021 to meet the Nasdaq Exchange’s minimum bid price requirement. It also expects its revenue to grow in the fourth quarter. However, analysts expect its EPS to remain negative in fiscal 2021 and 2022. So, we think it could be wise to wait before scooping up its shares.

How Does BIOLASE (BIOL) Stack Up Against its Peers?

While BIOL has an overall POWR Rating of C, one might want to consider investing in Medical - Devices & Equipment stocks having an A (Strong Buy) rating: Olympus Corporation (OCPNY), FONAR Corporation (FONR), and ICU Medical, Inc. (ICUI).

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BIOL shares fell $0.44 (-100.00%) in premarket trading Wednesday. Year-to-date, BIOL has gained 7.69%, versus a 0.52% rise in the benchmark S&P 500 index during the same period.

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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