Neuronetics, Inc. (NASDAQ:STIM) is a leading medical technology company that specializes in developing non-invasive treatments for psychiatric disorders, notably through its NeuroStar Advanced Therapy System for transcranial magnetic stimulation (TMS) to treat major depressive disorder.
Operating in a competitive landscape, Neuronetics faces stiff competition from companies like Kezar Life Sciences, Scholar Rock Holding Corporation, Verrica Pharmaceuticals, SI-BONE, and Sutro Biopharma.
In assessing Neuronetics’ financial efficiency, the Return on Invested Capital (ROIC) stands out as a pivotal metric. Neuronetics reports a ROIC of -32.27%, significantly underperforming its Weighted Average Cost of Capital (WACC) of 12.03%. This discrepancy results in a ROIC to WACC ratio of -2.68, signaling that the company is not generating adequate returns to cover its cost of capital.
Comparatively, Kezar Life Sciences exhibits a ROIC of -64.27% and a WACC of 6.37%, leading to a ROIC to WACC ratio of -10.10. This indicates that Kezar is less efficient than Neuronetics in generating returns relative to its cost of capital.
Similarly, Scholar Rock Holding Corporation and Verrica Pharmaceuticals also demonstrate lower efficiency with ROIC to WACC ratios of -8.56 and -55.95, respectively.
SI-BONE, Inc. presents a marginally better scenario with a ROIC of -17.82% and a WACC of 10.01%, resulting in a ROIC to WACC ratio of -1.78. This suggests that SI-BONE is more efficient than Neuronetics, albeit still not generating positive returns. Sutro Biopharma, with a ROIC to WACC ratio of -1.64, emerges as the least inefficient among the peers, indicating it is closer to achieving a balance between returns and cost of capital.
Overall, while Neuronetics is not currently generating positive returns on its invested capital, it is relatively more efficient than some of its peers. This comparison underscores the challenges faced by companies in the medical technology and biopharmaceutical sectors in achieving profitability and efficient capital utilization.