Friday, March 19, 2021

A Small Cap Equity holding: STAAR Surgical Company (STAA, $106.51): “Star Performance from STAAR Surgical” by: Jack Cyganiak, AIM Student at Marquette University

 STAAR Surgical Company (STAA, $106.51): “Star Performance from STAAR Surgical”

By: Jack Cyganiak, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.


• STAAR Surgical Company (NASDAQ:STAA) develops, manufactures, produces, markets, and sells implantable lenses for eyes and delivery systems used to implant lenses into eyes. 

• STAA net sales increased by 9% YoY from 2019 to 2020.  

• EPS decreased from 0.30 to 0.12 YoY from 2019 to 2020. 

• 96% of total sales in FY 2020 occurred outside of the United States of America with the Asia/Pacific region accounting for 72.4% of sales.

• STAA is still awaiting FDA approval for their implantable collamer lens products in the USA, which is the second largest market in the world for refractive procedures. 

Key points: STAAR Surgical Company has continued to grow sales in 2020 and has delivered an increasing amount of implantable collamer lens (ICL) units. In 2020, net sales were up $163.5 million compared to 2019 in which they reported $150.2 million. ICL unit growth was 11% YoY and made up 87% of sales in 2020. This is extremely promising for the company as they continue to capture market share from Lasik, pursue new customers across the world, and deliver quality surgeries.  

Despite having solid revenue growth, the company did experience a significant drop if EPS. In 2020, EPS was .12 per share compared to 2019 in which the company earned .30 per share. The drop in EPS was primarily due to a 32% decrease in operating income which can be attributed to an $6 million increase in research and development costs. Despite operating income decreasing, the increase in R&D exemplifies the company’s dedication to working, improving, and expanding the product portfolio. In addition, the company experienced a large tax provision in 2019 which assisted in the large boost in EPS. 

Despite being an American-based company, 72.4% of sales in 2020 came from the Asia/Pacific region. This large share of sales can be attributed to an already existing large share in China and approximate 20% increase in Japanese sales. The United States experienced a 30% decrease in YoY sales and only accounted for 4% of total sales. The FDA has yet to approve STAA’s products in the United States. Should the FDA approve of STAA’s products in the United States, the company would experience a great increase in revenue. There are around 700,000 refractive procedures annually, making the United States the second largest market in the world. 

What has the stock done lately?

The stock recently hit its 52-week high in mid-February, but it has since decreased. This is most likely due to their decrease on EPS. STAAR’s EPS in 2020 was .14 compared to 2019 which their EPS was .30. The decrease was primarily due to a large tax provision in 2019 and a decrease in operating income. Despite this sharp drop, the company is projected to have another consistent year of revenue growth and earnings growth.

Past Year Performance: STAA has increased about 240% in value over the past year, which is about the duration of how long the stock has been in the portfolio. The 52-week high and low of the stock is $23.20 - 128.23, and it is currently trading near its 52-week high. The company has experienced a tremendous year of growth and is looking to remain strong as the pandemic begins to wind down. 

Source: FactSet

My Takeaway

STAAR Surgical is a company that has been successful across the world in delivering unique refractive surgery solutions. There are over one million lenses implanted across the world with over 99% of patients stating they would receive the procedure again. The company has had a very successful year and produced excellent returns for the AIM Small-Cap Fund. My recommendation is to continue to hold our current position as the company continues to steal market share from Lasik and pursue ICL sales in the United States.

Source: FactSet