Why Analogic Corporation Shares Crashed

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 Analogic Corporation have lost 11% of their value today after the medical-tech company released weak guidance for its just-finished fiscal third quarter and for the full fiscal year. Trading in Analogic's shares was initially halted for 15 minutes pre-market, but it wasn't enough to prevent a double-digit opening-bell drop.

So what: Analogic now expects  to generate roughly $124 million in revenue and to earn $0.94 per share in profit for its fiscal third quarter, which ended in April. This compares quite poorly to Wall Street's consensus estimates of $136.3 million in revenue and $1.09 in EPS. Analogic now expects full-year revenue to drop by mid-single-digits, percentage-wise, as compared to an earlier forecast of roughly flat year-over-year revenues. This is the second consecutive downward revenue revision for Analogic, which had anticipated full-year revenue growth to be in the high single-digits, percentage-wise, earlier in the year.

Now what: By most accounts, Analogic has been a solid investment over the past few years -- the company's revenue hasn't risen much, but EPS and free cash flow  are both up by about 700% since late 2009. However, if the company expects fewer sales this year, it will have a hard time justifying an otherwise-reasonable P/E of 26, even if it can improve an already-strong bottom line. I'd tread cautiously today, as Analogic will report earnings soon. That report might offer valuable insight that today's guidance lacks, but for the time being, it doesn't seem like a great time to dive in.

Will this stock be your next multi-bagger?
Give me five minutes and I'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks 1 stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.

The article Why Analogic Corporation Shares Crashed originally appeared on Fool.com.

Alex Planes has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. 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 has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story