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Why Accuray Is Soaring Today

By Brian Feroldi – Updated Aug 17, 2018 at 11:38AM

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Shares pop after the company reports upbeat fourth-quarter results. Here's what investors need to know.

What happened

In response to its announcement of fiscal fourth-quarter and full-year results, Accuray (ARAY -1.00%), the maker of the CyberKnife Stereotactic Radiosurgery System, saw its shares jump as much 17% in early morning trading on Friday. Shares have since cooled off, but were still up about 6% as of 11:05 a.m. EDT.

So what

Here's a look at the headline numbers from the company's fourth quarter: 

  • Total revenue increased 1.5% to $113.7 million. The slight jump was driven by a 15% increase in services revenue and a 10% decrease in product revenue.
  • Gross product orders jumped 12% to $96.4 million. 
  • There was a net loss of $0.9 million, or $0.01 per share. For context, Wall Street was expecting a loss of $0.02, so this was a modest beat.
  • Cash balance at quarter end was $93 million. 
BUsinessman Giving two thumbs up

Image source: Getty Images.

Zooming out to the full fiscal year, here are the key takeaways:

  • Revenue increased 6% to $405 million. 
  • The backlog increased 6% to $478.5 million. 
  • Gross margin expanded 300 basis points to 40%.
  • There was a net loss of $23.9 million, or $0.28 per share.

Turning to guidance, here's what management expects to happen in fiscal 2019:

  • Revenue is expected to land between $415 million and $425 million. The midpoint of the range is ahead of the $413 million in revenue that Wall Street had projected.
  • Adjusted EBITDA is expected to land between $21 million and $27 million. This represents growth of about 23% to 58% on a year-over-year basis.

Traders appear to be applauding the smaller-than-expected loss and the revenue guidance. 

Now what

Accuray's stock had fallen by nearly 20% year to date before this earnings release, so today's relief rally makes sense given the better-than-expected revenue guidance. However, the midpoint of that guidance represents growth of about 4% year over year, a figure that I have a hard time getting excited about.

It's also worth pointing out that CFO Kevin Waters announced his decision to leave the company as of Oct. 1 to take a job with a privately held company. That news doesn't exactly fill me with confidence about Accuray's long-term potential.

Overall, I understand why Accuray is moving higher today, but this company doesn't come close to offering the growth potential that I like to see in an investment. For that reason, I have no interest in becoming a shareholder. 

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.

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