Abaxis Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of blood analysis specialist Abaxis (Nasdaq: ABAX  ) crashed to the tune of 16.7% on very heavy trading volume.

So what: These first-quarter results were not what the doctor ordered. The company's 3% sales growth year over year produced 37% lower earnings, as rising operating costs cut into margins. Analysts had expected flat earnings and 10% higher revenue.

Now what: Abaxis normally boasts a much fatter operating margin than rivals Alere (NYSE: ALR  ) and Heska, fully in class with industry giant and five-star CAPS favorite IDEXX Laboratories (Nasdaq: IDXX  ) . This quarter, the margin advantage all but evaporated. CEO Clint Severson explained that the margin hit came from heavy investment in future growth, including a new network of veterinary labs, and delays to some international orders contributed to the revenue slowdown.

But riddle me this, dear investor: Why would an investor in the medical sector take a chance on Abaxis turning these issues around, rather than banking on the proven growth of Intuitive Surgical (Nasdaq: ISRG  ) or the generous dividends of a Johnson & Johnson (NYSE: JNJ  ) ? In my opinion, we shouldn't.

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