Why Heartware International Inc. Shares Are Pumped Up

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 Heartware International , a developer and manufacturer of ventricular assist devices for the treatment of advanced heart failure, gained as much as 16% after it reported its third-quarter earnings results before the opening bell.

So what: For the quarter, Heartware International reported a whopping 140% year-over-year increase in sales to $54.8 million, which included a 38% increase in international revenue from the previous year and a 12% increase in domestic revenue from the sequential second quarter. Overall, it sold 549 Heartware Ventricular Assist Systems globally during the quarter. Net loss shrank considerably to just $11.4 million, or $0.69 in adjusted EPS, compared with the $25 million loss, or $1.75 per share, reported last year. Both figures handily trounced Wall Street's forecast, which had called for $49.4 million in revenue and a loss of $0.83 per share.

Now what: Following three full quarters of Heartware's VAS being commercialized in the U.S., it's clear that more physicians are utilizing the device and at a faster pace than most industry analysts had expected. That, combined with its ongoing pipeline innovations, is certainly good news for existing shareholders. However, being the value oriented guy that I am, and seeing the expectation for quarterly losses extending well into 2015, I'm a bit leery of Heartware's $1.4 billion valuation despite its technological edge. While its VAS device does give the company incredible pricing power, it's not enough to stem a cash burn, just yet. Until Heartware gets a lot closer to profitability, I would rather it simply remain a watchlist worthy stock.

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The article Why Heartware International Inc. Shares Are Pumped Up originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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