Why Cyberonics' Shares Jumped

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 implantable medical device maker Cyberonics jumped as much as 10% today following the announcement that a lawsuit had been dropped against the company.

So what: The lawsuit, brought forth by Andrew Hagerty, a former sales representative of Cyberonics, had claimed wrongful termination and included, according to an Associated Press report, "allegations of broad-based improprieties in terms of sales and marketing practices at the company." Today, Cyberonics announced that the lawsuit was voluntarily dropped, although the company notes the suit could be refiled at any time and he may pursue a resolution through arbitration.

Now what: One lawsuit may not seem like much, but the simple fact that it's gone, especially when the suit had damaging sales and marketing allegations mixed in, is a big plus for Cyberonics. In terms of the company itself, I see strong demand for its vagal nerve stimulation therapy system as the population ages, but I have a hard time getting over the valuation hump with Cyberonics at 26 times forward earnings after today's pop. If the economy were in better shape I might have more lenience, but even after today's jump I'd rather stay on the sidelines.

Craving more input? Start by adding Cyberonics to your free and personalized watchlist so you can keep up on the latest news with the company.

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The article Why Cyberonics' Shares Jumped originally appeared on Fool.com.

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