Can Accuray Build Some Momentum?

Small-cap radiation oncology specialist Accuray (ARAY) has long been an exercise in patience (and/or frustration, depending on whether you’re a “glass half-full” investor), but the strength in the shares since October’s earning release (up more than 30%) has been nice to see. The biggest question, though, remains unchanged – can Accuray string together a meaningful run of good quarters, exceed guidance, and establish a reasonable basis for believing that the company can grow to be both a viable competitor to Varian (VAR) and Elekta (OTCPK:EKTAY) and a profitable company?

I remain in the camp of “disappointed optimist”; I continue to hold my small position in these shares in large part because I believe the clinical benefits of Accuray’s platform are meaningful and underappreciated. The question of whether Accuray’s management can translate those benefits into tangible profits and cash flow for shareholders remains firmly open. Valuation likewise remains very tricky – I don’t believe the shares are all that cheap if the company can’t generate more than 4% long-term annualized revenue growth, but the story changes if and when mid-to-high single-digit revenue growth becomes plausible.

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Can Accuray Build Some Momentum?