On Tuesday, September 25, analysts at Raymond James downgraded shares of Abaxis, Inc. (ABAX). The firm lowered its rating on the stock from an Outperform to a Market Perform and did not set a price target. As a result of the downgrade, shares of ABAX reacted quite dismally, trading down at the open by as much as 5.30% on Tuesday. That said, I wanted to examine the company a bit further and take a look at how it compares to some of its industry-based competitors in terms of profit margin and operating margin. The two companies I chose to compare with Abaxis, Inc. are: Alere, Inc. (ALR) and Heska Corporation (HSKA).
Overview: Abaxis, Inc.
"Abaxis, Inc. develops, manufactures, markets, and sells portable blood analysis systems for use in human or veterinary patient-care setting to provide blood constituent measurements for clinicians worldwide. The company offers point-of-care blood chemistry analyzer, which consists of a compact portable analyzer and a series of single-use plastic discs, called reagent discs, containing all the chemicals required to perform a panel of up to 14 tests on human patients and 13 tests on veterinary patients. It markets the blood analysis systems under the Piccolo Xpress, Piccolo Classic, VetScan VS2, and VetScan Classic names. The company also provides VetScan HM5, VetScan HM2, VetScan HMII, and VetScan HMT hematology instruments, as well as reagent kits for veterinary applications. In addition, it offers VetScan VSpro, which assists in the diagnosis and evaluation of suspected bleeding disorders, toxicity/poisoning, evaluation of disseminated intravascular coagulation, hepatic disease, monitoring therapy, and the progression of disease states; VetScan VSpro fibrinogen test to provide in-vitro determination of fibrinogen levels in equine platelet poor plasma from a citrated stabilized whole blood sample; and i-STAT 1 that delivers blood gas, electrolyte, basic blood chemistry, and hematology results. Further, the company provides Canine Heartworm rapid test to detect dirofilaria immitis in canine whole blood, serum, or plasma; Canine Parvovirus rapid test to detect canine parvovirus antigen in feces; VetScan Giardia rapid test to detect giardiasis, a gastrointestinal infection caused by the protozoan parasite Giardia; and Canine Lyme rapid test to detect Borrelia burgdorferi in canine whole blood, serum, or plasma. Additionally, it offers veterinary reference laboratory diagnostic and consulting services. The company sells its products through direct sales force and independent distributors. Abaxis, Inc. was founded in 1989 and is headquartered in Union City, California (Yahoo! Finance)".
The Profit Margin Comparisons of Abaxis, Inc.
As a whole, and in my opinion, the Veterinary Pharmaceutical sector has one of the most diverse ranges of profit margins when compared to some of the other industries I've written articles on. That said I wanted to demonstrate the fact that Abaxis, Inc. actually outpaces two direct competitors within the sector. The first of these companies is Alere, Inc., which has been substantially outpaced by Abaxis, Inc. in terms of profit margin. In the last 12 months Abaxis, Inc. has demonstrated a positive profit margin of 8.45%, whereas Alere, Inc. has demonstrated a negative profit margin of -5.22%. Comparatively speaking ABAX surpasses ALR by a ratio of 3.23 to 1. The second of these companies is Heska Corporation, which is also substantially outpaced by Abaxis, Inc. in terms of profit margin. In the last 12 months Abaxis, Inc. has demonstrated a positive profit margin of 8.45%, whereas Heska Corp, Inc. has demonstrated a positive profit margin of 2.29%. Comparatively speaking ABAX surpasses HSKA by a ratio of 3.68 to 1.
The Operating Margin Comparisons of Abaxis Inc.
As was the case with profit margins, and in my opinion, the Veterinary Pharmaceutical sector also has some of the most diverse operating margins I've seen since I've started writing. That said I wanted to demonstrate the fact that Abaxis, Inc. actually outpaces two direct competitors within the sector. The first of these companies is Alere, Inc., which has been substantially outpaced by Abaxis, Inc. in terms of operating margin. In the last 12 months Abaxis, Inc. has demonstrated a positive operating margin of 12.95%, whereas Alere, Inc. has demonstrated a positive operating margin of only 7.16%. Comparatively speaking ABAX surpasses ALR by a ratio of 1.80 to 1. The second of these companies is Heska Corporation, which is also substantially outpaced by Abaxis, Inc. in terms of operating margin. In the last 12 months Abaxis, Inc. has demonstrated a positive operating margin of 12.95%, whereas Heska Corporation has demonstrated a positive operating margin of just 3.24%. Comparatively speaking ABAX surpasses HSKA by a ratio of 3.99 to 1.
Final Analysis
Should potential investors consider the chance to establish a position in Abaxis, Inc. especially after the wake of the Raymond James downgrade concerning the company's valuation? From a comparative standpoint with regard to the company's margins relative to some of the biggest names in the Veterinary Pharmaceutical sector, I think the numbers speak for themselves and demonstrate clear strength from a fundamental standpoint. I'd consider a position in ABAX at current levels, and consider increasing that position if the stock continues to fall below the $33/share plateau.
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.
