Investing in quality growth stocks is a great strategy for generating outsized returns over the long term. Valued at a market cap of less than $400 million, Profound Medical (TSX:PRN) is a commercial-stage medical device company that is poised to grow at a rapid pace.
It develops and markets incision-free therapeutic systems for the image-guided ablation of diseased tissue in North America and Europe. Profound Medical’s flagship TULSA-PRO system uses MRI-guided robotic transurethral thermal ultrasound and temperature feedback controls to precisely ablate targeted areas of prostate tissue, whether malignant or benign.
The company also offers Sonalleve, an MRI-guided thermal therapy platform that treats uterine fibroids, adenomyotic tissue, bone metastasis pain, osteoid osteoma, and benign tumours.
Today, PRN stock is down 70% from all-time highs, allowing you to buy the dip and benefit from outsized returns over the next three years.
The bull case for investing in this small-cap TSX stock
Profound Medical delivered an 87% revenue jump in the third quarter as the medical device company continues to gain traction with its MRI-guided prostate treatment technology. The Toronto-based firm brought in $5.3 million for the three months ended September 30, up sharply from $2.8 million in the same period last year.
The company now has 70 TULSA-PRO systems installed at hospitals and treatment centers, with another 93 sites in advanced stages of the sales pipeline. Chief Executive Arun Menawat said the firm is on track to hit at least 75 installations by year-end.
Revenue from recurring procedures reached $4.1 million in the quarter, while one-time equipment sales added $1.2 million. Gross margins improved to 74.3% from 63.1% a year earlier. It reported a net loss of $8 million, or $0.26 per share, down from $9.4 million in the third quarter of 2024. Profound ended Q3 with almost $25 million in cash, providing it with liquidity for the next three quarters.
Profound Medical offers treatment that uses ultrasound waves guided by MRI imaging to destroy prostate tissue without surgical incisions.
Patients typically leave the hospital the same day with minimal bleeding or severe side effects. Medicare now covers the procedure following approval of a Category One billing code earlier this year.
Some commercial insurers are also starting to reimburse on a case-by-case basis, with payments ranging from $25,000 to $65,000 per treatment.
Profound launched new software in the quarter that cuts procedure time for treating benign prostate enlargement, a condition affecting millions of men.
- The upgrade allows doctors to complete treatments in 60 to 90 minutes, making it competitive with other therapies.
- Company president Mathieu Burtnyk said the technology can also target both cancer and benign tissue in a single session.
- The firm is testing broader applications beyond prostate care. Its Sonalleve system uses focused ultrasound to treat uterine fibroids and is being studied for pancreatic cancer.
Chief Financial Officer Rashed Dewan said the company expects to reduce cash burn as revenue grows and eventually reach a cash flow positive status. Management maintained its 70% revenue growth target for 2025.
Is this Canadian stock undervalued?
Analysts tracking Profound Medical forecast revenue to increase from $15.2 million in 2024 to $142 million in 2029. Moreover, it is forecast to report a free cash flow (FCF) of $63 million in 2028, compared to an outflow of $32.5 million in 2025.
If the TSX stock is priced at 20 times trailing FCF, which is quite cheap, it could more than triple over the next three years.
