(ABAX - Analyst Report
) has witnessed a consistent rise in its stock price during the past year and delivered a positive earnings surprise of 23% in the most recent quarter. Given the long-term growth projection of about 15%, along with an uptrend in earnings estimates, this manufacturer of portable medical and veterinary blood analysis systems became a Zacks #1 Rank (Strong Buy) stock on June 28, 2012.
Abaxis Exited Fiscal 2012 on a High Note
On April 26, 2012, Abaxis reported a 40% year-over-year increase in its fiscal fourth quarter 2012 earnings to 21 cents per share, beating the Zacks Consensus Estimate of 17 cents by more than 23%. For the full year, earnings came in at 58 cents, down 9% from 64 cents in the prior year, but marginally ahead of the Zacks Consensus Estimate of 54 cents.
Net sales during the quarter increased 14% year over year to $42.7 million and surpassed the Zacks Consensus Estimate by 4%. The year-over-year growth was based on higher sales in both North America (up 16% to $35.4 million) and in the international market (up 5% to $7.3 million). For the full year, sales increased 9% over the prior year to $156.6 million.
Fourth-quarter revenues from the veterinary market (contributing 80% to the top line) increased 19% to $34.1 million, while revenues from the medical market (contributing 18%) remained almost flat year over year at $7.6 million.
Earnings Estimates on the Rise
In response to the strong fourth quarter performance, earnings estimates moved up over the last 60 days. The Zacks Consensus Estimate for fiscal 2013 has risen 2.4% to 86 cents per share, representing year-over-year growth of more than 47%. For fiscal 2014, the Zacks Consensus Estimate increased 4.6% to $1.14 per share, reflecting growth of 32.7%.
Abaxis valuation looks stretched compared to its peers by most metrics. Based on 2013 earnings estimates, the company is trading at a P/E of 41.4x, which is almost 3 times the peer group average of 13.8x. The price-to-book ratio of 4.8x is also substantially higher than the peer group average of 2.4x. We consider the premium to be warranted given its higher long-term earnings growth rate (15%) compared to the industry average (12%).
All said, shares look pretty impressive with a return on investment (ROI) of 8.2%, which is much better than the peer group average of 2.6% and a return on asset (ROA) of 7.3%.
Chart Reflects Growth Potential
Abaxis stock price performance has been reasonably strong with the chart showing an upward trend over the past few months. Except for some minor pullbacks, shares have fared relatively better since October 2011 than the simple moving average for 200 and 50 days, or SMA 200 and SMA 50. The one-year return for the stock is noteworthy at 25.4% compared to the meager 2.7% return from the S&P 500 index.
Founded in 1989, Abaxis, Inc., with a market cap of $777 million, deals in portable blood analysis systems for use in the human (Piccolo Xpress) or veterinary (VetScan VS2) patient-care setting to provide clinicians with rapid blood constituent measurements. The blood analysis system consists of a compact portable analyzer and a series of single-use plastic discs (reagent discs), containing all the chemicals required to perform a panel of up to 14 tests on human patients and 13 tests on veterinary patients. Headquartered in California, Abaxis provides routine laboratory testing as well as specialty testing for veterinarians nationwide through its AVRL division.