1 Beaten-Down Stock to Buy Right Now and Hold for a Decade

President Donald Trump's trade war is creating significant uncertainty. Equities plunged following his decision to impose tariffs on almost every country, then soared after he announced a 90-day pause on his expanded tariff plans. It's challenging to predict which way the market will move next, but in times like these, it helps to invest in companies that look likely to perform well in the long run.

Consider the case of TransMedics Group (NASDAQ: TMDX), a medical technology company whose shares have declined by 31% over the past six months. Let's find out why it's worth it to buy this company's shares and hold on to them for the next decade.

Why TransMedics Group's shares dropped

First, let's review what TransMedics does. The company developed a device called the Organ Care System (OCS) to help store donor organs -- not a simple thing to do. Once they're removed from their natural habitat (the human body), organs deteriorate quickly, making them unusable for transplants. There are already far more patients in need of donor organs than the number of people willing to donate, so keeping the ones that are available in a healthy condition is of the utmost importance.

While other options exist, TransMedics' OCS mimics the physiology of the human body, helping organs stay in good shape and remain ready for transplant longer. The U.S. Food and Drug Administration has approved the company's OCS to preserve lungs, hearts, and livers for transplants. TransMedics typically generates strong revenue, and it finally turned in a profit last year:

TMDX Revenue (Annual) data by YCharts.

Why, then, have TransMedics shares dropped lately? There are three main reasons. First, the company's latest updates, particularly for the third quarter, came in short of analyst expectations. Second, in December, it lowered its guidance for the fourth quarter, which came as a disappointment to investors.

Lastly, short-seller Scorpion Capital published a highly critical report questioning the company's practices. While TransMedics quickly issued a denial, the stock still plunged following these developments.

Despite these headwinds, it might be worth it to buy TransMedics shares today and hold on to them for the next decade. Here's why.

The future is bright for this innovator

One factor that could drive TransMedics Group's results over the next 10 years is growth in the number of organ donors. Another is the company's superior technology, which helps improve outcomes. Let's address each of these factors.

First, an organ transplant is often needed to treat end-stage organ failure. But since we're talking about vital organs, most living humans aren't going to be quick to volunteer to donate their own, even when they can -- it's feasible for kidneys, but not so much for hearts. Even so, the number of people who donate after death has increased in recent years.

In the U.S., this trend is expected to continue for the foreseeable future. TransMedics sees a compound annual growth rate of 5% as a conservative estimate, and 12% for the optimistic projection, through 2028. This is good for both patients and TransMedics' business.

Second, the traditional method of storing organs before transplants -- cold storage -- comes with significant limitations. Cold storage can quickly damage organ tissue, making it unusable for transplants, among other problems. TransMedics' approach leads to much higher utilization rates for available organs.

For instance, within the lung transplant space, only 23% of donated organs kept through cold storage end up being used -- but 87% of those stored through TransMedics' OCS are utilized for transplants. That's a massive difference, which points to TransMedics' ability to grab an increasingly higher share of this market while increasing its revenue and earnings.

What should investors make of the recent issues it encountered? Slowing revenue growth is almost inevitable as a company matures. Perhaps this justifies the recent sell-off TransMedics experienced, but the stock is now almost as cheap as it's been in three years:

TMDX PS Ratio (Forward) data by YCharts.

Finally, note that you should always take the word of short-sellers -- who make money from a company's share price dropping -- with a grain of salt. Without convincing evidence that TransMedics is guilty as charged, it's best to ignore the noise.

In my view, this healthcare stock remains a top pick for investors who are willing to stay the course over the next decade. If you initiate a position at current levels, TransMedics Group could deliver excellent results.

Should you invest $1,000 in TransMedics Group right now?

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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends TransMedics Group. The Motley Fool has a disclosure policy.