Harvard Bioscience Stock – Can HBIO Stock Boost Your Portfolio?
As investors, we look for growing companies that can produce returns. Having said that, Harvard Bioscience stock looks ready for a run following yet another earnings beat. Will HBIO stock continue to reward shareholders?
Harvard Bioscience (NASDAQ: HBIO) stock is up over 150% from a year ago. Furthermore, the company expects growth will pick up in the second half of 2021.
Expanding its product variety, increasing demand, and a growing backorder log are all reasons for higher growth projections. But, supply chain costs are also expected to cut into the company’s profits.
The growth stock is committed to lowering costs to become more profitable. Let’s see how HBIO stock owners are benefiting.
Harvard Bioscience Stock Growth Strategy
As the healthcare sector focused on Covid19, the epidemic took a toll on Harvard Bioscience. As a result, the management team rose to the occasion. The team developed a plan to turn things around.
In May 2020, Harvard Bioscience released a letter to shareholders explaining the company’s strategy.
Here are a few of the main ideas:
- Establish a leadership team
- Reduce debt interest expenses
- Improve margins
- Enhance supply chain
- Upgrade product portfolio
These are all relatively attainable goals that can help steer the company in the right direction. Let’s check in and see how the business is doing.
1) Establishing a Leadership Team
The new leadership team at Harvard Bioscience brings solid experience to the growing company. To begin, James Green, the company’s new CEO, was hired in July of 2019. He previously served on the board of directors and as CEO of Analog Corp.
Second, Michael Rossi, the new CFO, brings extensive experience. He was most recently the CFO of Laborie Medical Technologies.
Both James and Michael are confident in their ability to turn around businesses.
2) Reduce Debt Interest Payments
Debt can weigh heavily on a company, and if the interest rate is high, it can eat into its profit margins. Harvard Bioscience is working on paying down debt and interest owed.
In Q4 2020, the team refinanced its debt. As a result of the restructuring, the company is now saving $3 million a year. Also, Harvard Bioscience Q2 earnings show another $0.9 million debt reduction.
3) Improve Margins
Improving the company’s margins is crucial for future growth. Yet the operating margin is at 15% in Q2 2020, down from 18% in Q2 2019. The decrease is due to higher selling prices. These expenses are mostly related to freight and materials.
Management also cited temporary cost cuts in Q2 2020 as the reason. Despite the decrease, the operating margin is still higher than it was in the same period in 2019.
4) Enhance Supply Chain
Many of the supply chain factors affecting the company are out of its control. There’s not much Harvard Bioscience can do to lower material costs.
Supply chain issues are still plaguing many industries. On the plus side, the company has a large backorder log. Backorders show there’s a high level of demand.
5) Upgrade Product Portfolio
New products can also promote new revenue streams. In Q2, Harvard Bioscience introduced nine new/upgraded products.
Similarly, the company has added 17 products so far this year. As a result, management anticipates that the products will generate relevant revenue in 2022.
More on the New Direction of Harvard Bioscience Stock
When the pandemic struck, it put additional strain on many industries. Companies have no choice but to adapt or risk being left behind. With that in mind, Harvard Bioscience chose to take the company in a new direction.
As a result, the strategy is beginning to pay off. Revenue grew 25% in Q2 to $29.2 million. Although revenue levels aren’t quite where they were pre-Covid, it’s on the rise.
In fact, the company has a strong backorder log due to ongoing supply chain issues. As these challenges are resolved, the company’s revenues will be able to return to pre-Covid levels.
Harvard Bioscience is making the necessary changes to position itself for the future of medical technology.
HBIO Stock Forecast: What to Expect Next From Harvard Bioscience Stock
To sums things up, for a company that’s been in business for over 100 years, it knows a thing about staying current. Harvard Bioscience is optimizing its business to become more profitable with fewer expenses. As a result of the changes, HBIO stock investors are capturing a share of the profit.
Harvard Bioscience stock is up over 150% since the same time last year. The profits are due in great part to the execution of the company’s strategic plan. For that reason, the medical equipment supplier is on track to continue its expansion.
The company is expecting revenue growth in the range of 12%–15% this year. Strong demand and cost reductions should help the company achieve its target.
But, if the supply chain issues persist, it can continue to raise expenses. The extra costs will then cut into profit margins.
Will the HBIO stock continue to outperform? We’ll learn more when the company reports its third-quarter earnings. But for the time being, Harvard Bioscience stock investors are pleased with the company’s progress.
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About Pete Johnson
Pete Johnson is an experienced financial writer and content creator who specializes in equity research and derivatives. He has over ten years of personal investing experience. Digging through 10-K forms and finding hidden gems is his favorite pastime. When Pete isn’t researching stocks or writing, you can find him enjoying the outdoors or working up a sweat exercising.