Picking a great stock can be extremely rewarding, regardless of whether you're first to the party. Investors who bought Google this time last year are up a very respectable 19%. However, those investors who boarded the Google train at its 2004 IPO at the opening price of $100 are sitting on a 350% gain.
The allure of buying an IPO has faded a bit since the dot-com era, but there's still that je ne sais quoi about being in on a great stock from the ground floor. Investing in IPOs can be tricky, though, since there's typically less information available about the company, and unless a bank outside the underwriting team decides to cover the stock, there won't be any analyst estimates to work from. Last year, while IPOs such as Rule Breakers pick Omrix Biopharmaceuticals showed us why it's still great to catch a winner at the open, others, like Vonage, reminded us that you can still lose big.
The Motley Fool's new investing community, CAPS, is helping to make new stocks more transparent by allowing investors to share their thoughts and outlooks on recent IPOs (as well as more than 3,800 other stocks). Since last week brought us only one new IPO, and it is below the $100 million market cap threshold for CAPS, I decided to review some of the IPOs from earlier in the year that still could use your love.
Sources: Yahoo! Finance and CAPS as of Feb. 27.
Meet the newbies
Accuray is a medical device company that manufactures the CyberKnife system, a radiosurgery system used in the treatment of tumors. Radiosurgery is a process that uses radiation to target tumors inside the skull that would otherwise be very difficult to operate on. Accuray's CyberKnife extends the idea of precision radiation treatment from just the cranium to the rest of the body, and roughly 50% of the procedures that have been run have been used on areas such as the spine, lungs, or prostate.
Revenue growth has been explosive -- Accuray grew the top line 136% between its 2005 and 2006 fiscal years (ended in June). Revenue was up a mind-boggling 740% year over year for the quarter ended in September, though making single-quarter comparisons can be difficult because selling large medical systems like these can mean lumpy results. On the bottom line, the company, which primarily uses a direct-sales model, just turned a slight profit for the first time in the quarter ended in September. It sports a gross margin around 50%, but is still trying to grow into its operating costs.
The CAPS players who have given Accuray the thumbs-down so far seem to be put off by its valuation (17 times trailing revenue), though one top CAPS player who's in favor of Accuray, johnnymack91362, says, "If you liked [Rule Breakers pick] Intuitive Surgical (Nasdaq: ISRG), you'll love this one."
For more products that were only seen in sci-fi not all that long ago, I'll turn to AeroVironment. The company derives revenue primarily from two sources: sales of unmanned aircraft systems (UAS, a.k.a. drones) to the U.S. Department of Defense, and sales of quick-charge systems for industrial vehicle batteries in the commercial market. AeroVironment also brings in some revenue from its Energy Technology Center, which supports internal R&D and develops solutions for the alternative energy market.
The stock currently has a three-star rating on CAPS, but multiple CAPS All-Stars have spoken out in support of it. SteadySaber is behind the stock mainly because the IPO was handled by financial powerhouse Goldman Sachs, but Steve819 sees high potential for the drones and considers the stock's valuation to be reasonable. darkflame also chimed in to point out the high level of insider ownership for the stock.
Got some thoughts on these IPOs? Head over to CAPS and help them earn their stripes. While you're there, you can check out some of the thoughts that more than 23,000 CAPS members have had on the nearly 4,000 stocks currently rated. CAPS is entirely free -- and it's even more fun than watching Mean Girls on a loop.
Get down with some more IPO action:
Omrix Biopharmaceuticals and Intuitive Surgical are Rule Breakers picks. You can take a 30-day free trial of the newsletter without breaking any Fool rules.
Fool contributor Matt Koppenheffer owns shares of Goldman Sachs but does not own shares of any of the other companies mentioned. He encourages feedback, particularly if you know where he can get a Calteen bar. The Fool's disclosure policy just wants to lose three pounds, but thinks you are perfect exactly the way you are.
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