What happened

In response to its fiscal first-quarter results and guidance for 2018, Varian Medical Systems (NYSE:VAR), a leading provider of radiation therapy products, jumped 12% as of 10:55 a.m. EST on Thursday.

So what

Here's a review of the headline numbers from the company's fiscal first quarter:

  • Revenue grew 13% to $679 million. This was slightly behind the $682 million that analysts had predicted.
  • Oncology revenue rose 14% to $649 million. This big jump was offset by a 4% decline in revenue from its particle therapy business.
  • GAAP net loss per share came in at $1.22. However, this was largely the result of one-time charges related to the Tax Cuts and Jobs Act.
  • Non-GAAP earnings per share more than doubled to $1.06. This was $0.04 ahead of what Wall Street was looking for.
  • The company spent $57 million on share buybacks during the quarter, which retired 525,000 shares.

Turning to guidance, here's what management expects to happen in fiscal year 2018:

  • Revenue is expected to climb between 4% and 7%. This range compares favorably to the 3.8% growth that Wall Street was expecting.
  • Non-GAAP EPS is projected to land between $4.24 to $4.36. The midpoint of this range is also ahead of the $4.24 that analysts had modeled.

Given the higher-than-expected quarterly profit and bullish guidance, it isn't hard to figure out why investors have bid up shares to a fresh all-time high.

Money raining down on a businessman from sky

Image source: Getty Images.

Now what

Varian Medical Systems' investors have enjoyed market-smashing returns over the last year, which is great to see. However, the big jump has stretched the company's valuation quite a bit. Shares are currently trading hands north of 29 times full-year earnings estimates. That's quite a generous multiple when compared to Varian's long-term profit growth estimate of just 8%.

Given the valuation and modest growth rate, I have a hard time getting excited about owning Varian's stock at these elevated levels. For that reason, I'd suggest that healthcare-focused investors, for now, look elsewhere for compelling stocks to buy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.