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Cepheid, a molecular diagnostics company, engages in developing, manufacturing, and marketing integrated systems for testing in the clinical and partner markets. Its systems enable molecular testing for organisms and genetic-based diseases by automation. The company offers GeneXpert system that integrates sample preparation in addition to DNA amplification and detection; and SmartCycler system, which integrates DNA amplification and detection to allow rapid analysis of a sample. The company was founded in 1996 and is headquartered in Sunnyvale, California.
CPHD Tops Expectations in Eight of Nine Quarters
Cepheid has beaten the Zacks Consensus Estimate in eight of the last nine quarters. Over the last eight straight beats, the company produced some huge beats. In the five quarters from September 2010 through and including September 2011 the company posted an average earnings beat of $0.03, or 163% ahead of estimates on average. As a result, over those five quarters, the stock moved higher by about 10% following the reports.
The June 2011 quarters saw a 250% beat, as the company posted positive earnings when the Zacks Consensus Estimate was calling for a loss in the quarter. The stock moved higher by more than 32% as a result.
Cepheid Most Recent Earnings Report
On January 26, 2012 the company reported revenue of $80 million roughly $7 million more than the Zacks Consensus Estimate and higher than the $59 million reported in the year ago period. EPS of -$0.03 was $0.7 worse than the estimate or a 175% earnings miss. Following the report, the stock moved higher by 25%.
Next Earnings Report Coming Soon
Cepheid reports earnings on April 19 after the close of the market. The Zacks Consensus Estimate is calling for $77 million in revenue and -$0.02 of EPS. In the year ago period, the company reported revenue of $60 million and $0.01 in EPS and the stock moved higher by about 5% following the release.
When a company straddles the line of profitability over the last few quarters, the traditional valuation metrics tend to get skewed. Take the trailing twelve months PE for Cepheid, its multiple is 941x compared to an industry average of 14x. The forward PE is much lower, but still wildly high at 153x compared to a 14x industry average. Price to book is also a few multiples of the industry average and price to sales of about 9x is more than three times higher than the 2x industry average.
When we look at the price and consensus chart for Cephid, we see the stock increasing right along with the increase in earnings estimates over the last few years. More recently, the stock has moved ahead of estimates and that gives the aggressive growth investors the sense that the stock is overvalued. Continuing to beat the number soundly will provide analysts a chance to increase estimates in the future, and that should lead to higher prices. Cepheid is a Zacks #1 Rank (Strong Buy).
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