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.

Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.