<This article was published a couple of months ago, but somehow fell through the cracks for me and I never posted it here.>
On multiple occasions, I’ve lamented Accuray’s (ARAY) inability to sustain, let alone build upon, past success, and the tape tells the tale – the stock’s five-year and 10-year returns are pretty dismal, as investors have grown weary of the “wait until next year” story that has long dominated the name.
That said, I saw reasons for more bullishness in my last update on the company, and fiscal first quarter results (reported earlier in November) were better than expected. Along with improved visibility on the R&D pipeline and progress in China, the shares are about 40% higher now, but still not overvalued relative to what mid-single-digit revenue growth and low-to-mid-teens EBITDA margins should support.
To be clear, this is a name with above-average risk, and one where investors have to believe that past results are not predictive. Between improved product offerings (both hardware and software), changing reimbursement, and growth in the Chinese market, I believe there is a bull case still to be made, but there is no point in pretending that success here is assured.
Read more here:
More Progress Evident At Accuray, But Sustainability And Follow-Through Remain Key
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