Abaxis Shares Plunged: What You Need to Know
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of blood analysis specialist Abaxis (NAS: ABAX) crashed to the tune of 16.7% on very heavy trading volume.
So what: These first-quarter results were not what the doctor ordered; that is, 3% sales growth year over year produced 37% lower earnings as rising operating costs cut into margins. Analysts had expected flat earnings and 10% higher revenue.
Now what: Abaxis normally boasts a much fatter operating margin than rivals Alere (NYS: ALR) and Heska, fully in class with industry giant and five-star CAPS favorite IDEXX Laboratories (NAS: IDXX) . This quarter, the margin advantage all but evaporated. CEO Clint Severson explained that the margin hit came from heavy investment in future growth, including a new network of veterinary labs, and delays to some international orders contributed to the revenue slowdown.
But riddle me this, dear investor: Why would an investor in the medical sector take a chance on Abaxis turning these issues around rather than banking on the proven growth of Intuitive Surgical (NAS: ISRG) or the generous dividends of a Johnson & Johnson (NYS: JNJ) ? In my opinion, we shouldn't.
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At the time this article was published Fool contributor Anders Bylund holds no position in any of the companies discussed here. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is investors writing for investors.
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