Why Natus Medical, Inc. 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 Natus Medical (NASDAQ: BABY  ) , a provider of neurodiagnostic and newborn health-care products, popped by as much as 12% after reporting its fourth-quarter results before the opening bell.

So what: According to Natus Medical's press release, the company reported a fractional decline in revenue to $90.6 million from $90.8 million in the year-ago period as net income rose 82%, and adjusted EPS expanded to $0.37. By comparison, Wall Street had been looking for Natus Medical to report an EPS profit of just $0.31 on $90.1 million in revenue. Natus reaffirmed its first-quarter guidance issued just over two weeks ago of $0.21 to $0.24 in adjusted EPS, and $82 million to $86 million in revenue, but slightly bumped up its full-year adjusted EPS forecast to a new range of $1.14 to $1.18 from prior guidance of $1.12 to $1.16. Specific to that bump, and its better-than-expected fourth-quarter results, was stronger international revenue, which has the company targeting a long-term annual non-GAAP profit margin goal of 20%.

Now what: It was another quarter of rather "blah" top-line growth, but Natus Medical did what it does best, and that's pummel Wall Street's EPS estimates. The company has now delivered five straight double-digit EPS percentage beats going back to the fourth-quarter of fiscal 2012. While I appreciate the niche that Natus Medical operates in, and feel that it can utilize that niche to its pricing advantage, I'm concerned that there are few avenues to consistent organic growth at the moment. Revenue in 2014 is expected to be flat to up very low single-digits, which makes Natus' projected P/E of 22 at the EPS midpoint a bit tough to swallow. Until we see newer products hitting the market, or a serious decline in Natus' share price, I'd suggest passing at these levels.

Natus Medical shares may be soaring today, but they may be hard-pressed to keep up with this top stock in 2014
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report, "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.


Read/Post Comments (0) | Recommend This Article (1)

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.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2815215, ~/Articles/ArticleHandler.aspx, 10/1/2014 8:35:50 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement