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3 Reasons to Add Accuray (ARAY) Stock to Your Portfolio

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Accuray Incorporated (ARAY - Free Report) has been gaining on the back of its suite of software upgrades. A solid first-quarter fiscal 2022 performance, along with favorable study outcomes, is expected to contribute further. However, overdependence on technologies and macroeconomic instability persist.

Over the past year, this Zacks Rank #2 (Buy) stock has gained 12.2% compared with 11.9% growth of the industry and 29.5% rise of the S&P 500 composite.

The renowned radiation oncology company has a market capitalization of $433.68 million. Accuray projects 285.7% growth for fiscal 2023, in which it expects to maintain its strong performance. The company surpassed estimates in two of the trailing four quarters, missed the same in one and broke even in the other, the average earnings surprise being 141.67%.

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Let’s delve deeper.

Suite of Software Upgrades: We are optimistic about Accuray’s series of software upgradations that has been a growth driver for the company. In recent times, Accuray announced the VOLO Optimizer software upgrade for CyberKnife, which reduces treatment time by up to 50%, thus allowing CyberKnife treatments to be performed in 15 to 30 minutes. The company, in October, showcased its new VOLO Ultra for the Radixact System.

Positive Study Outcomes: We are upbeat about a few positive study outcomes on Accuray’s products. The company, in November 2021, announced that more than two decades of globally-driven clinical data supports the use of Accuray’s CyberKnife robotic radiotherapy platform for the delivery of stereotactic radiosurgery treatments for neurological diseases. This recent CyberKnife data was published online in the Journal of Neurosurgery.

Accuray, in October, announced that a study (published in Frontiers in Oncology) found that early-stage breast cancer patients could experience significant improvements in survival if treated with accelerated partial breast irradiation delivered using the Accuray CyberKnife robotic radiotherapy platform.

Strong Q1 Results: Accuray’s robust first-quarter fiscal 2022 revenues buoy optimism. The company registered upticks in its overall top line and revenue sources during the period, which is encouraging. Receipt of the FDA’s 510(k) clearance for the VOLO Ultra enhancement to the Accuray Precision treatment planning system for the Radixact System, followed by its full commercial launch, is impressive. Strong demand for the ClearRT Helical kVCT Imaging for the Radixact System and new integration with the RayStation treatment planning system for the CyberKnife M6 and S7 Systems raise our optimism on the stock.

Downsides

Overdependence on Technologies: Achieving consumer and third-party payor acceptance of the CyberKnife and TomoTherapy platforms as preferred methods of tumor treatment is crucial to Accuray’s continued success. Physicians will not begin to use or increase the use of the CyberKnife or TomoTherapy platforms unless they determine, based on experience, clinical data and other factors, that the two platforms are safe and effective alternatives to traditional treatment methods.

Macroeconomic Instability: Accuray’s business is materially affected by global market conditions and the overall economy. Concerns over economic and political stability, the availability of fiscal and monetary stimulus measures to counteract the impact of the COVID-19 pandemic, among others. These may have a significant impact on the company’s operations.

Estimate Trend

Accuray is witnessing a positive estimate revision trend for fiscal 2022. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 250% north to 7 cents.

The Zacks Consensus Estimate for the company’s second-quarter fiscal 2022 revenues is pegged at $104.9 million, suggesting a 7.6% rise from the year-ago quarter’s reported number.

Other Key Picks

A few other stocks in the broader medical space that investors can consider are Laboratory Corporation of America Holdings (LH - Free Report) or LabCorp, Thermo Fisher Scientific Inc. (TMO - Free Report) and AMN Healthcare Services (AMN - Free Report) .

LabCorp, carrying a Zacks Rank #2, has an estimated long-term growth rate of 10.6%. LH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 25.73%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

LabCorp has gained 53.4% compared with the industry’s 16.9% rise over the past year.

Thermo Fisher has an estimated long-term growth rate of 14%.TMO’s earnings surpassed estimates in the trailing four quarters, the average surprise being 9.02%. It currently carries a Zacks Rank #2.

Thermo Fisher has gained 41.4% compared with the industry’s 11.9% rise over the past year.

AMN Healthcare has an estimated long-term growth rate of 16.2%. AMN’s earnings surpassed estimates in the trailing four quarters, the average surprise being 19.51%. It currently flaunts a Zacks Rank #1.

AMN Healthcare has gained 77.5% against the industry’s 49.2% fall over the past year.

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