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Why Cardiovascular Systems Will Keep Pulling Back

By Brian D. Pacampara, CFA - Apr 23, 2013 at 9:40AM

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Market-lagging returns could be written in this 2-Star.

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, medical device company Cardiovascular Systems (CSII 5.90%) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Cardiovascular Systems and see what CAPS investors are saying about the stock right now.

Cardiovascular Systems facts

Headquarters (founded)

St. Paul, Minn. (1989)

Market Cap

$359.2 million

Industry

Health care equipment

Trailing-12-Month Revenue

$92.7 million

Management

CEO David Martin (since 2007)
CFO Laurence Betterley (since 2008)

Return on Equity (average, past 3 years)

(76.2%)

Cash/Debt

$29.2 million / $15.1 million

Competitors

Covidien
Medtronic
Boston Scientific

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 25% of the 16 members who have rated Cardiovascular Systems believe the stock will underperform the S&P 500 going forward.

Just last week, one of those Fools, jed71, succinctly summed up the bear case for our community:

My personal opinion is [Cardiovascular Systems] just got the better end of the deal on the recent share dilution. Over the past few months, there has been big run up in price, which the company was able to take advantage of by issuing new shares at $17.60 per share (further diluting current shareholders by approx 10%).

It also looks like insiders have been selling shares and not really accumulating any further shares at this level. While some of these sales might be "scheduled events", it does not offer much confidence toward the current share valuation.

I am betting those who participated in this new offering are going to be vastly disappointed in a few months when gravity sets in.

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Stocks Mentioned

Cardiovascular Systems, Inc. Stock Quote
Cardiovascular Systems, Inc.
CSII
$15.61 (5.90%) $0.87
Covidien plc Stock Quote
Covidien plc
COV.DL
Medtronic plc Stock Quote
Medtronic plc
MDT
$102.53 (-0.21%) $0.22
Boston Scientific Corporation Stock Quote
Boston Scientific Corporation
BSX
$39.22 (-0.68%) $0.27

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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