Why Accuray Shares Jumped

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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 Accuray (NASDAQ: ARAY  ) jumped as much as 13% after the company reported its third-quarter earnings results.

So what: For the quarter, the maker of the CyberKnife image-guided robotic surgery system for solid tumor removal reported revenue of $70.6 million, compared to $101.6 million in the year-ago period, and a loss per share of $0.37. Both figures fell well short of the Street's expectations for revenue of $77 million and an EPS loss of $0.22. In addition, Accuray slightly lowered its full-year sales guidance to a range of $310 million to $318 million from the $320 million to $330 million forecast at the end of last quarter.

Now what: This may seem like a confusing move for such comparatively poor results, but there's actually a good reason for the move higher: sequential product revenue growth. Net new product orders totaled $44.1 million during the third-quarter compared to just $17.9 million in the second-quarter, demonstrating that its new products may be gaining traction. Furthermore, its backlog rose by 7% to nearly $298 million. While I understand why shareholders are bumping the stock higher today -- because this may be the first bit of decent news they've seen in months -- I also can't get over the fact that Accuray's restructuring will be a slow and ongoing process that will result in continued losses over the interim. With that in mind, I'd gladly keep my distance from Accuray until I see consistent profitability.

Craving more input? Start by adding Accuray 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 Accuray, 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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Related Tickers

9/26/2016 4:00 PM
ARAY $5.53 Down -0.13 -2.30%
Accuray CAPS Rating: ***