Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Heartware International (NASDAQ: HTWR), a developer and manufacturer of ventricular assist devices for the treatment of advanced heart failure, gained as much as 16% after it reported its third-quarter earnings results before the opening bell.
So what: For the quarter, Heartware International reported a whopping 140% year-over-year increase in sales to $54.8 million, which included a 38% increase in international revenue from the previous year and a 12% increase in domestic revenue from the sequential second quarter. Overall, it sold 549 Heartware Ventricular Assist Systems globally during the quarter. Net loss shrank considerably to just $11.4 million, or $0.69 in adjusted EPS, compared with the $25 million loss, or $1.75 per share, reported last year. Both figures handily trounced Wall Street's forecast, which had called for $49.4 million in revenue and a loss of $0.83 per share.
Now what: Following three full quarters of Heartware's VAS being commercialized in the U.S., it's clear that more physicians are utilizing the device and at a faster pace than most industry analysts had expected. That, combined with its ongoing pipeline innovations, is certainly good news for existing shareholders. However, being the value oriented guy that I am, and seeing the expectation for quarterly losses extending well into 2015, I'm a bit leery of Heartware's $1.4 billion valuation despite its technological edge. While its VAS device does give the company incredible pricing power, it's not enough to stem a cash burn, just yet. Until Heartware gets a lot closer to profitability, I would rather it simply remain a watchlist worthy stock.