Why Conceptus Shares Popped

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 medical device maker Conceptus (NASDAQ: CPTS  ) jumped as much as 12% following the release of its fourth-quarter results and after announcing an update on its European clinical trial for its next-generation Essure, a surgery-free birth-control device for women.

So what: For the quarter, revenue grew 21.5% to $40.7 million, as gross margin expanded 60 basis points to 84.1%. Net income also demonstrated significant growth, coming in at $0.17 compared to a loss of $0.08 per share in the year-ago period. Wall Street has only been expected $40.2 million in revenue and just $0.11 in EPS. Conceptus' 2013 forecast for $155 million to $159 million in revenue and EBITDA of $34 million to $37 million was pretty much right in line with the consensus. As icing on the cake, the company also announced its first patient enrollment in Europe for testing of Essure.

Now what: If I had a dollar for every time I could say that a company's product makes sense on paper, but its valuation is far from making sense, I'd probably have a lot of dollar and be a lot closer to retirement by now. I have little doubt that Essure will continue to be a growth driver for Conceptus, but I also feel it could be three years or more before revenue and earnings growth catch up with its already frothy valuation. Personally, I'm perfectly happy waiting this one out on the sidelines.

Craving more input? Start by adding Conceptus to your free and personalized watchlist so you can keep up on the latest news with the company.

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