Well, can it? That's the question that my fellow Fool, Stephen Simpson, asked three months ago, after observing that medical technology firm Kensey Nash (NASDAQ:KNSY) was priced like a fast-growing tech firm but had no growth to match the price. Stephen's verdict: "Sooner or later, Kensey Nash needs to stand up and deliver the growth." On Monday, the firm will get another chance to do just that.

Wall Street Wisdom:

  • General consensus. Stephen isn't the only investor getting a bit tired of waiting for Kensey to start growing again. Among the six analysts who track the firm, "sell" ratings outnumber "buys" 2-to-1, with three fence-sitters mumbling, "Um, hold, I guess."
  • Revenues. Their lack of enthusiasm is, of course, understandable, given what they expect to see Kensey report on Monday -- namely, a 7% decline in sales to $14.2 million for fiscal Q2 2006.
  • Earnings. Not to mention, a 63% decline in earnings to $0.10 per share. Why, even the most optimistic analyst thinks Kensey earned at best less than half of its fiscal Q2 2005 profits.

Margin watch:
Don't look for any better news in the company's margins. They're pretty much constrained by what the company prints on its income statements. Namely, minimal declines up until last quarter (when both operating and net margins plunged).

Margins %

6/04

9/04

12/04

3/05

6/05

9/05

Gross

72.4

72.4

71.9

72.1

72.0

71.1

Op.

29.2

29.9

30.0

29.2

28.8

24.3

Net

22.2

22.3

22.6

22.5

21.1

16.3

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

Foolish lookout:
Kensey's problem is that when you hold your margins more or less steady while your revenues also remain roughly the same, well, everything stays the same. In other words, you can't grow earnings. Tomorrow, we need to see Kensey produce one or the other. It either has to sell more stuff, or make more money selling the same amount of stuff that it has been selling for more than a year now.

If you believe the estimates, we won't see either of those things happen, of course. So if the firm is to retain its current 32 times earnings multiple, it has to prove analysts wrong.

Fool contributor Rich Smith does not own shares of any company named above.