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Why Masimo Shares Jumped

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  ) , a developer of noninvasive patient monitoring products, rose as much as 11% after the company reported its first-quarter earnings results last night.

So what: For the quarter, Masimo saw total revenue rise 14% to $135.9 million, driven by a 14% increase in SET pulse oximetry sales and a 24% jump in Rainbow SET unit sales. Profits rose modestly to $0.28 per share from $0.27 in the previous year and were reduced by $0.03 due to unfavorable currency translation. Wall Street had been expecting Masimo to report a profit of $0.28 per share (in-line with estimates), but only $134.5 million in revenue.

Now what: This was a good report, but perhaps not worthy of a double-digit move higher. Masimo has now met expectations in four of the past five quarters and is going to rely on its newer Rainbow SET to drive bottom-line growth. However, at 17 times forward earnings and with decelerating sales growth, I'm not sold that it's a fantastic value. I believe the best approach here might be to wait and see if it can keep up its double-digit growth for a few more quarters.

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

While you can certainly make huge gains in device makers like Masimo, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report, "3 Stocks That Will Help You Retire Rich," names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

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9/26/2016 3:13 PM
MASI $59.57 Down -0.20 -0.33%
Masimo CAPS Rating: *****