(ABAX - Analyst Report
) is a manufacturer of portable medical and veterinary blood analysis systems that has advanced by more than 30% over the past year. In its most recent quarter, this Zacks #1 Rank (Strong Buy) delivered a positive earnings surprise of 23.0%. Given the long-term growth projection of about 15% and the uptrend in earnings estimates, ABAX appears to have bright prospects ahead.
Solid Fourth Quarter
On April 26, 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. 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 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 16.0% to $35.4 million) and in the international market (up 5.0% to $7.3 million). For the full year, sales increased 9.0% over the prior year to $156.6 million.
Fourth-quarter revenues from the veterinary market (contributing 80.0% to the top line) increased 19.0% to $34.1 million, while revenues from the medical market (contributing 18.0%) 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 90 days. The Zacks Consensus Estimate for fiscal 2013 has risen 6.2% to 86 cents per share, representing year-over-year growth of more than 48.0%.
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 44.8x, which is almost 3 times the peer group average of 14.1x. The price-to-book ratio of 5.2x is also substantially higher than the peer group average of 2.8x. We believe that the premium is warranted given a higher long-term earnings growth rate (15.0%) compared with the industry average (11.9%).
Even so, 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%. This implies that the company reinvests its earnings more efficiently than its peer group.
Chart Reflects Strength
Abaxis stock price performance has been reasonably strong with the chart showing an upward trend over the past few months. The stock reached its 52-week high of $39.72 on July 3, 2012. Moreover, the stock is currently trading above its 50- and 200-day moving averages, which stand at $34.5 and $28.9, respectively. In fact, except for some minor pullbacks, shares have fared relatively better since late 2011 than the simple moving average for 200 and 50 days. The one-year return for the stock is noteworthy at 31.5% compared to the meager 0.8% 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.