Accuray (NASDAQ:ARAY), a California based medical equipment maker, appears to be undervalued at its current $4.04 share price. The company manufactures and markets its Cyberknife robotic device for hospitals and doctors around the world. The robotic device targets benign and malignant tumors of various types of cancer in the body by using image guidance to be more precise than other therapy methods.
The company depends on selling Cyberknife devices to its customers, doctors and hospitals, around the World and also the revenue it generates from repair and maintenance to existing installed Cyberknife systems.
In June of 2011, Accuray completed its acquisition of Tomotherapy, a medical device maker. The company paid over $250 million for Tomotherapy. The combined company will be able to integrate its technology and sales base to better sell the devices.
The company recently announced results from its fourth quarter and fiscal year end. The financial data included almost a month of Tomotherapy revenue on the books as well. Fourth quarter revenue for Accuray was $75.2 million. Of this revenue $64.1 was Cyberknife related and the remaining $11.1 was from Tomotherapy. The company had record Cyberknife related revenue. Earnings per share for the quarter were -$0.40. Last year the company posted a profit of $0.08 per share. The company did pay $18.7 million in acquisition charges related to Tomotherapy.
For the fiscal year, Accuray reported revenue of $222.3 million. All but the $11.1 million from Tomotherapy was Cyberknife related. The company did report a loss of -$0.44 per share (compared to a profit of $.05 last fiscal year).
Accuray now has 240 Cyberknife systems installed worldwide after its installed during the fourth quarter. The company also has 342 installed Tomotherapy systems after the company installed 9 during the quarter.
During the latest conference call Accuray provided backlog numbers which proved to be very encouraging. Nineteen Cyberknife machines were added to the backlog while one order was cancelled. The added machines represent $56.7 million in value. Also added during the quarter were 17 Tomotherapy systems valued at $38 million.
Guidance for fiscal 2012 from the company is $400 to $415 million with $80 to $85 coming in the current first quarter. Checking on Zacks.com they have listed guidance at $382 million. The company seems to have high expectations for the years but with its numerous systems in its backlog and its combined workforce from two companies. Accuray has no debt on its books currently and has over $95 million cash. Currently sitting on that much cash, Accuray has around $1.59 cash per share and trades at a book value of $2.98. (Numbers from Yahoo Finance on 9/30/11)
The company faces competition from Varian (NYSE:VAR) which has a large market capitalization of $6.1 billion. Varian represents pure play competition for Accuray. Also General Electric (NYSE:GE), Integra Lifesciences (NASDAQ:IART) and Siemens (SI) have divisions that compete with Accuray's Cyberknife.
I have held shares of Accuray since 2008. (For a complete look at stocks I own, see this article). I bought shares at close to double what they are trading for now. I will continue watching shares and consider buying some more at the $4 range to cut my average cost per share down. I believe shares are worth $7 this year and will continue to rise to $10 by 2012.
Disclosure: I am long ARAY and may purchase more shares at any time.