Why BioScrip Shares Tanked

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 BioScrip (NASDAQ: BIOS  ) have fallen by nearly 16% today as a result of the company's underwhelming third-quarter earnings report.

So what: Bioscrip's third quarter came in with a solid 23% year-over-year improvement on the top line, with a reported $208.9 million in revenue, which was ahead of the $205.5 million Wall Street consensus. However, the company merely broke even on the bottom line ($0.00 in EPS), which was weaker than the consensus estimate of a $0.03 profit. BioScrip has now reduced the high end of its full-year revenue guidance, from the $830 million to $865 million range to a new range of $830 million to $850 million. Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) will now be pegged in the $50 million to $52 million range. By comparison, this quarter's adjusted EBITDA was $12.1 million, essentially flat except for a 48% surge in EBITDA from the Infusion Services segment.

Now what: BioScrip is well off the highs it reached this summer, but investors need to weigh two possibilities before getting back into the stock: that this weakness is only temporary, or that BioScrip's wild volatility over the past year might result in a major pop on renewed sentiment. The latter option is essentially a gamble, but the company's weakness is not a recent thing -- both free cash flow and EBITDA (the unadjusted sort) have been hovering around the breakeven point for years with no real indication of growth. This latest report doesn't provide that indication, so I'd stay on the sidelines.

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