Tactile Systems Technology TCMD, a leader in innovative therapies for chronic conditions, has demonstrated consistent year-over-year revenue growth over the past three quarters. The company reported revenues of $72.1 million (up 6% year over year), $73.2 million (up 7.1%) and $73.1 million (up 5%) in the first, second and third quarters of 2024, respectively. While these figures reflect a commendable annual growth trajectory, a closer examination reveals a mix of positive advancements and persistent challenges shaping the overall revenue trend.
One of the key favorable factors for investors is Tactile System’s significant outperformance in 2024 compared to its industry. In the past three months, TCMS’ shares have gained 20.5%, beating the Medical – Instruments’ decline of 2.8% and the S&P 500’s gain of 5.2%.
The contrast is even more striking compared to key peers like TransMedics Group TMDX and Atossa Genetics ATOS, whose shares have plunged 59.1% and 33.3%, respectively. This relative strength suggests that Tactile Systems may perform better than broader market trends or its peers.
Three-Month Performance
Zacks Investment Research
Image Source: Zacks Investment Research
Core Product Lines Driving Growth
On the positive side, TCMD’s core product lines have been key growth drivers. The lymphedema business, the company’s flagship offering, has continued to capture market share through strong demand for its Flexitouch system and the newly launched Nimbl platform. These products cater to a growing patient base, including breast cancer survivors and individuals with chronic venous insufficiency.
The success of the lymphedema product line has been amplified by robust performance in the Veterans Affairs (VA) and commercial channels, both of which achieved double-digit growth in the third quarter. Similarly, the Airway Clearance segment, led by AffloVest, has shown steady progress. The product’s portable design and increasing adoption among patients with bronchiectasis have positioned it as a valuable solution in an underserved market.
Operational improvements have further bolstered TCMD’s revenue growth. Investments in workflow enhancements, such as the national rollout of an e-prescribing tool and streamlined patient insurance verification, have improved the efficiency of the order-to-revenue process.
Additionally, the implementation of a customer relationship management (CRM) system and the expanded role of Patient Education Consultants (PECs) have allowed sales representatives to focus on driving revenues. These efforts reflect TCMD’s commitment to modernizing its business operations and creating a more streamlined experience for patients and clinicians.
Clinical validation has also played a pivotal role in supporting revenue growth. TCMD’s publication of positive clinical trial results for the Flexitouch system, particularly in the VA channel, has enhanced the credibility of its products. These findings have bolstered the company’s reputation and driven adoption among healthcare providers and patients. Together, these positive factors have solidified TCMD’s position as a leader in its market segments, ensuring sustained growth in key revenue channels.
The Zacks Consensus Estimate for 2025 earnings is currently pegged at 86 cents per share, indicating a 31.4% year-over-year improvement. The estimate improved 6.2% over the past 60 days.
Improving Estimates Over 60 Days
Zacks Investment Research
Image Source: Zacks Investment Research
Key Challenges Hampering Growth
TCMD has faced notable challenges that have tempered its sequential revenue growth. A significant negative factor has been the impact of increased Medicare documentation requirements under the LCD policy. These changes have placed additional burden on sales representatives, extending the timeline from order completion to revenue recognition. While the company has implemented mitigation strategies, including process automation and training initiatives, these efforts are yet to offset the adverse impacts on productivity.
Uneven buying patterns in the Airway Clearance segment have also weighed on revenues. Seasonal dynamics and inconsistent purchasing behaviors among durable medical equipment (DME) customers created fluctuations in AffloVest sales during the third quarter. Moreover, sequential stagnation in overall revenues highlights the lingering impact of these external factors. While TCMD has demonstrated resilience in managing these challenges, it underscores the complexities of navigating regulatory and market dynamics in the healthcare industry.
TCMD's Stock Valuation
Tactile Systems’ forward 12-month P/S of 1.3X is lower than the industry’s average of 4.4X and its five-year median of 1.5X.
Zacks Investment Research
Image Source: Zacks Investment Research
Wrapping Up
TCMD currently carries a Zacks Rank #2 (Buy). The company’s revenue performance reflects a delicate balance between leveraging operational strengths and addressing external headwinds. The company’s investments in innovation, operational efficiency and clinical validation have provided a strong foundation for growth. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Although challenges like Medicare documentation requirements and uneven buying patterns underscore the need for continued adaptability, Tactile Systems’ ability to capitalize on opportunities while mitigating risks will determine the trajectory of its future growth. The company also has a Value score of A and a Growth Score of C, implying an attractive valuation and potentially strong rising momentum. These provide an opportune moment to invest in TCMD.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
