is a Zacks #1 Rank (Strong Buy) after posting eight of nine
positive earnings surprises.
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
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
Brian Bolan is the Aggressive Growth Stock Strategist
Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor
service You can follow him at twitter.com/bbolan1