InMode Stock Analysis & Deep Dive

Cosmetic surgery for your portfolio

Update October 2024

The timing of this deep dive was far from optimal. InMode has been hit hard by the rising interest rates since most machines are bought on credit. This in turn led to a weakening demand. The Israel-Hamas war which started just 3 months later certainly did not help. On top of that, I am not happy with the management. If the company is as cheap as it looks (as of this writing an EV/earnings of 4.3 and a cash level that makes up 50% of the market cap) then I would expect major stock buybacks from the management. The ongoing buybacks have been way too timid in this scenario. As of today,y I am still holding the small position I have initiated after writing the article and I will wait this one out.

For transparency reasons, I will keep this post in its original form online.

Intro

Beauty has always been a great field to make money. Aging happens naturally and even with the healthiest diet and exercise, time will leave a mark on your body. InMode is working on turning back the clock for skin-related aging signs.

At the same time, the population is becoming more overweight and obese. Wouldn’t it be wonderful if there was a device that burns your fat and simultaneously tightens your skin? Welcome to the world of InMode.

The Company

InMode is an Israeli company that was established in 2008 and went public in August 2019. At the end of 2022, Inmode employed 480 people of which 118 joined in 2022.

Manufacturing is outsourced to three subcontractors which are all based in Israel. This leads to low inventory levels and untypical low CapEx for a hardware company. To ensure a long-term relationship with the suppliers, InMode purchased 10.3% ownership in one of them.

The IP is protected by six patents in the US with a further eleven pending approval

It’s best to let InMode introduce itself: “We design, develop, manufacture and commercialize innovative, minimally invasive and non­invasive surgical/medical products”

We are a leading global provider of innovative, energy­based, minimally invasive surgical medical treatment solutions. Within the global aesthetics market, our products and solutions are primarily designed to address three energy­based treatment categories comprised of: face and body contouring; medical aesthetics; and women’s health.

The Industry

Classic competitors include Botox as well as large pharmaceutical companies like Allergan.

US cosmetic surgery is a growing market with an expected CAGR of 9% for the next years. Non-invasive procedures are expected to grow a lot faster than invasive procedures.

42% of Americans are obese, while another third of the population is overweight. If we consider only the overweight part of society as potential clients, InMode has lots of room to grow.

The Business

InMode developed its own proprietary RF energy­based technologies to overcome the downsides of traditional surgeries. The company believes that these small procedures open the doors for a new customer segment, which would not have undergone classic surgeries. The main benefits for the customers are: small to no scars, no required anesthesia, and RF energy­based technology simultaneously kills fat and tightens skin while being less expensive than full surgery.

Inmode has launched ten platforms since 2010. Each platform consists of an energy source, a handpiece or hand-free controls, and the proprietary software of InMode. All of these platforms can be upgraded. InMode has 29 FDA clearances and 84 peer-reviewed publications.

InMode is currently developing further platforms to tackle adjacent fields: treatment of eyelid contractions and dry eyes, a handpiece to treat snoring, and a new device to treat Erectile Dysfunction. Most of these are in early stages but they offer a glimpse into the broad field that InMode is working on.

To make sure, that the physicians using the devices are properly trained, InMode offers after-sales training and support.

If you want to read the full article and learn about the management, the composition of the segments, takeovers, risks, fundamental analysis, and a conclusion please subscribe and support my work. To all existing subscribers: Thank you for your support and enjoy the rest of the article!