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The current market malaise has done a number on stocks in lots of sectors and while the slide in the healthcare space hasn’t been outrageous names like medical device company Salona Global (Salona Global Medical Device Corp Stock Quote, Charts, News, Analysts, Financials TSXV:SGMD) have nonetheless lost ground over the past year. That’s a bit confounding, says Bruce Campbell of StoneCastle Investment Management, who thinks with Salona’s strong track record the stock deserves a better fate. “It's a bit surprising that’s the market,” said Campbell, speaking on BNN Bloomberg on Wednesday. “If you look at what they've done since that was shortly after they listed and in that time they’ve jumped their revenue over 100 per cent and their earnings are up about 140 per cent.” Salona Global, an acquisition-oriented, vertically integrated medical device company focused on the recovery science market, launched as a public company on June 9 of last year, with the initial few weeks looking fantastic. The stock went from $0.54 to as high as $1.41 by early July, but that was the high point for SGMD, as shares pulled back over the ensuing months, landing in the $0.60-$0.80 range where it has stayed ever since. But the company has been busy over the past 12 months. Among the highlights: expanding its sales into Europe; acquiring Simbex, an IP-based business with a number of revenue and royalty-generating products; launching a new US hospitals-focused sales team; acquiring a sales and marketing business in Mio-Guard; and completed a $4.2 million financing round. Led by Chairman Les Cross, who has brought over employees from his former company DJO Global, Salona is aiming to dig into what it says is a deep pipeline of acquisition targets along with product IP and distribution deals. “It has been a great year of performance for us,” said Cross in a press release on Wednesday. “In just the past year we have accomplished our goal of creating a world-class, vertically integrated medical device company serving the recovery science market. We have built revenues and gross profits over this short time as well. I expect to find additional opportunities as we continue to operate and grow in the recovery science market.” By the numbers, Salona’s revenue has gone from $4.0 million as of the quarter ended August 30, 2021, to $8.5 million by the latest-reported quarter, the company’s fiscal fourth, ended February 28, 2022. Gross profits over the period went from $1.2 million to $2.9 million and the company’s cash balance at the end of the fiscal Q4 was $8.1 million. On his company’s ability to push through with its business model, Cross wrote, “we have attracted a team of seasoned professionals, many of whom I have worked with or managed as the former CEO of DJO Global. We have been working in this market together for decades in some cases and we see the opportunity to recreate our past success with a leading global company in our market. We are well placed to continue our rapid revenue and gross profit growth in the current fiscal year and beyond.” The healthcare space as a whole had a great run, including in the medical device space, in the earlier part of the pandemic but those returns have been more muted overall over the past 12 months. The S&P 500 Healthcare Sector SPDR ETF (S&P 500 Healthcare Sector SPDR Stock Quote, Charts, News, Analysts, Financials (NYSE:XLV), for example, which attempts to track the industry-gauging Health Care Select Sector Index in the US, is up about six per cent for the past year. More narrowly, the Ishares US Medical Devices ETF (US Medical Devices Ishares Stock Quote, Charts, News, Analysts, Financials NYSE:IHI) finished its upward climb around last September and has been dropping ever since. Its 12-month return is currently about negative four per cent. Campbell says Salona Global’s drop in share price is just making the stock look more attractive. “Les Cross, he’s the CEO there, he basically said he was going to roll out this company very similar to the DJO Global that he had done previously, where he took it from $150 million to just over $1 billion and then sold it to private equity,” Campbell said. “He’s going to do the same thing with this company and he's delivered on pretty much everything he told us he was going to and, at the same time, the stock price has come down,” Campbell said. “So, it’s a much better valuation than it was a year ago, and we continue to hold it. It’s actually the biggest position in one of our funds,” he said.

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