Sector Rerating Has Cast A Shadow Over Penumbra

One of the more time-tested pieces of investment advice is “don’t fight the tape”; I can (and have) complain all I want about how sector-wide valuations can be elevated (or too low), even unreasonably so, but it can take a long time for that process to correct. In the meantime, investors have the not-so-fun choice of either sticking to their well-established valuation principles (and seeing opportunities go by) or trying to pick and choose when to bend those rules.

I believe this is relevant Penumbra (NYSE:PEN) today. Down about 25% since my last update, the company has not underperformed to any meaningful extent. Instead, valuation multiples have come down for many high-growth med-tech names, with stocks like DexCom (DXCM), Inari (NARI), Intuitive Surgical (ISRG), and SI-BONE (SIBN) down around 15% to 20% as well, largely on market rerating.

None of this automatically makes Penumbra conventionally cheap – the shares do still trade at over 6x FY’23 revenue and the company will need to generate considerable revenue and cash flow growth over the next decade (and beyond) to drive attractive appreciation. I believe they can and will, though, and I think this may be a reasonable time to consider these shares again.

 

Read more here: 

Sector Rerating Has Cast A Shadow Over Penumbra