Masimo 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 Masimo (Nasdaq: MASI  ) fell nearly 19% in early trading and remain off more than 10% as of this writing. Third-quarter results came in below expectations. Management also cut its full-year outlook.

So what: Revenue grew 3% to $104 million, yet profits fell to $0.24 a share from $0.27 in last year's third quarter. Analysts had expected the maker of blood-monitoring instruments to produce $0.27 a share on $109.7 million in revenue, according to data compiled by Yahoo! Finance. The message? Five-star rating or not, few medical device makers can deliver the way Intuitive Surgical (Nasdaq: ISRG  ) does.

Now what: Unfortunately, the story didn't end there. Management compounded the miss by lowering its full-year forecast to $1.04 to $1.06 in per-share earnings on $436 million to $439 million in revenue. Both estimates were well off the bottom end of earlier guidance and what Wall Street expected. Does it matter? Would you buy shares of Masimo now that the stock trades for less than analysts' consensus long-term estimates for profit growth? Please weigh in using the comments box below.

Interested in more information about Masimo? Add it to your watchlist by clicking here.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool owns shares of Masimo. Motley Fool newsletter services have recommended buying shares of Intuitive Surgical. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 26, 2011, at 4:46 PM, Stubeeef wrote:

    This stock is a dog that has fleas, they have benefited from great marketing but the ghost is out of the box and recent studies have killed them. Get out and be glad.

  • Report this Comment On October 27, 2011, at 5:26 PM, helvit wrote:

    Stubeeef---

    I'd like to see you cite those "recent" killer studies. You're blowin' mighty thin smoke.

    Recent published and presented results for noninvasive newborn heart defect and emergency hemoglobin monitoring are especially impressive, useful and necessary.

    The miss is basically a function of macro conditions in military as well as hospital system budgeting. Also consider the sales gap and expenses during the implementation of monitor modifications to alleviate the incidence of cheap, faulty knockoff monitors purchased by budget conscious but ignorant supply managers in the hospitals.

    Masimo's products are not luxury discretionaries, they are health care time, money and life savers, but there is a requirement for change in the providers' systems, which can be slow to turn. This company has its head, heart and resources in the right place ( and is not at all blowin' smoke.)

  • Report this Comment On November 01, 2011, at 12:07 PM, edjewett wrote:

    This is a great company. I would love to work there. Great products, great people. The CEO just bought ~60k additional shares @ $1 million +, so I don't think he is too concerned. I think he's smart. Buying his own company at a discount @ ~$20/share (off of the 52 week high of ~$30+/share). I doubled my small position last week. Plus, the Board of this company authorized the buyback of some 3 million shares. I feel this stock has a lot of growth potential and I intend to increase my position in it.

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