Investors who own shares of Cyberonics, Inc (NASDAQ:CYBX) have watched the value of their investments more than double over the past year. It has been an exciting stock to watch and proven itself a profitable one to own. But as every good investor knows, past success does not necessarily mean success in the future. Does Cyberonics have what it takes to keep this momentum going?
Historical trends in Cyberonics' stock
The growth we have witnessed in this past year is part of a much longer five year trend of upward momentum. Cyberonics has climbed from $18.54 up to a current high of $73.52. To put it another way, that represents a growth of more than 350% in just five years, averaging about 70% growth per year.
These are some remarkable numbers that would have any momentum investor jumping at the opportunity to own some of this stock. Cyberonics' performance has vastly outstripped the industry average as well as that of the S&P 500.
The company's financial reports of this extended period of time support the fast growing stock price. Its cash flow from operations has been growing dramatically since early 2010 (from approximately $42 million up to $79.05 million last year). This is one of the strongest indicators that the momentum seen in Cyberonics is sustainable. A significant portion of its growth can be attributed to increased revenue from business activities rather than loans or temporary cost-cutting measures.
Together with its increasing cash flow from operations, Cyberonics has seen a consistent decrease in its debt to equity ratio, showing that it is capable of meeting its debt obligations while running an efficient and profitable business.
Cyberonics' most recent results
In a vote of confidence, the company's board of directors recently approved a move to buy back one million shares over the course of the next two years. This repurchase program is part of Cyberonics' trend, now lasting six consecutive years, to buy back shares. The company has paid out approximately $152 million to its investors as part of its share buyback program.
In Cyberonics' most recent quarterly report, the company saw a growth of 9.4% in its net worldwide sales. Its cash flow from operations grew an additional $21.1 million over the same quarter in the previous year, continuing its five year trend of substantial growth in this area.
At $0.51 per share, the company's diluted earnings per share were up almost 9% over the previous year. This beat analysts' predictions of $0.49 per share. In short, the company is seeing growth just about everywhere and shows little sign of slowing down.
Looking ahead to 2014
Cyberonics has increased its investments in two key companies, Imethra Inc and Cerbomed GmbH, in hopes of seeing continued progress from these high performance businesses. The company has set ever higher expectations for itself in the coming year as it makes plans to achieve its goal of surpassing its already record-level growth.
The company has finally attained regulatory approval for its AspireSR generator in Europe. It expects to be ready to launch sales of the new product within the next few weeks. It has begun the first phase of testing for the generator in the United States and hopes to gain regulatory approval here as soon as possible.
The general opinion seems to be that the stock is relatively bearish and this has definitely taken its toll on its market value. The stock has slumped somewhat dramatically over the past month, falling further and further below its 52 week high. As there is some risk that this recent downward trend could continue for the next couple of months, Cyberonics would not make a good short-term trade.
However, it shows every sign of being able to bounce back over the next couple of quarters so those in the market for a long position will likely be satisfied with this company. It is continuing with the development of other products in addition to the AspireSR so that investors should have a lot to look forward to not just in 2014 but in the years following as well. Cyberonics is an ambitious company with lots of room to grow and showing every sign of being capable of such growth.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.