What happened

Shares of medical-device maker ViewRay (NASDAQ:VRAY) tumbled 56% in August, according to data provided by S&P Global Market Intelligence. That more than erased the gains the stock had seen during the first half of the year, as shares dropped to their lowest point since early 2017. 

So what

ViewRay manufactures the MRIdian line of radiation oncology devices. These machines use MRI technology to allow for delivery of radiotherapy doses to precise locations within the body. The company faces stiff competition from competitors in the space.

A medical worker speaks to a man lying down outside a large medical device

ViewRay hopes its state-of-the-art radiation therapy devices can propel it to outperformance. Image source: Getty Images.

On Aug. 9, ViewRay reported middling Q2 2019 results. Revenue was up 84%, which beat expectations, but that was about the only bright spot in the report. Orders were down, the backlog was down, the company's cash on hand was down, and it posted a bigger net loss than in the prior quarter or the year-ago quarter.

Adding insult to injury, the company slashed its 2019 guidance, with the new midpoint more than 25% lower than previously expected. It also announced that it expects to burn about 20% more cash than previously expected this year. The icing on the cake was the surprise announcement that CFO Ajay Bansal would be stepping down at the end of September. 

The stock reacted about the way you'd expect

Shares rebounded a bit in the subsequent days, which may have been caused by short-sellers exiting their positions or bargain hunters snapping up the now-cheaper shares. But by month's end, shares were still worth less than half of what they were when the month began. 

Now what

ViewRay believes that its latest model, the MRIdian Linac, which can help oncologists see how the body is reacting to a radiation treatment in real time, represents a significant step forward and will propel the device to dominance over competing equipment from rival healthcare companies. However, there hasn't been any sign of a surge in orders. 

The company finished Q2 2019 with just $122 million in cash on hand, and the low end of its cash-spend guidance was $80 million for the year. This means that if things don't turn around pretty quickly, Viewray will need to raise money by either taking on debt or diluting its already-beaten-down shares.

Neither option is good for investors. Despite its sharply lower price, ViewRay doesn't look like a buy.