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Here's Why Investors Should Retain Accuray (ARAY) Stock Now

Zacks Equity Research

Accuray Incorporated ARAY is gaining prominence in the MedTech space, courtesy of a strong presence in China and solid demand for its flagship Radixact & CyberKnife platforms.

Notably, the company received regulatory approval from India to sell its flagship Radixact X9 system in the recent past. Management is optimistic about this development as it will expand Accuray’s precision treatment solutions worldwide.

However, Accuray faces cutthroat competition in the radiation-oncology space. In a year’s time, this Zacks Rank #3 (Hold) stock has lost 7.4% against the industry’s 11% growth.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

So here we take a quick look at the major headwinds confronting the company and discuss the factors that ensure near-term recovery.

Cutthroat Competition in the Niche Markets

Accuray is exposed to significant competition in the radiation oncology market, which is characterized by rapid technological changes.

The company competes head-to-head with Varian Medical VAR, Elekta, ViewRay and BrainLAB AG in this market. While the CyberKnife System faces challenges from Varian’s Trilogy system, TomoTherapy systems are challenged by Varian’s RapidArc technology and the TrueBeam systems.

Strength in China

Accuray enjoys a strong presence in China.

Earlier this year, the company’s subsidiary, Accuray Asia, formed a joint venture with CNNC High Energy Equipment Co., a subsidiary of China Isotope and Radiation Corporation. Management feels that this represents a significant opportunity for the company in the country. (Read More: Accuray & China Isotope Collaborate to Sell Radiation Devices)

In fact, the company’s last reported quarter saw strong orders from China for its CyberKnife platform.

Additionally, management anticipates the recent China Ministry of Health quota announcement to drive Accuray’s revenues in fiscal 2020. In fact, for the fiscal third quarter, management expects gross orders from China to surge.

Accuray Incorporated Price and Consensus

 

Accuray Incorporated Price and Consensus | Accuray Incorporated Quote

 

Which Way Are Estimates Trending?

The Zacks Consensus Estimate for third-quarter fiscal 2019 is pegged at a loss of 4 cents. The same for revenues stands at $104 million, mirroring a 4.2% improvement year over year.

For fiscal 2019, the Zacks Consensus Estimate is pinned at a loss of 16 cents. The same for revenues is pegged at $420.4 million, reflecting a 3.8% improvement year over year.

Key Picks

A few better-ranked stocks in the broader medical space are Stryker Corporation SYK and Masimo Corporation MASI, each carrying a Zacks Rank #2 (Buy).

Stryker’s long-term earnings are expected to grow 10%.

Masimo’s long-term earnings are estimated to rise 15.60%.

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Masimo Corporation (MASI) : Free Stock Analysis Report
 
Accuray Incorporated (ARAY) : Free Stock Analysis Report
 
Varian Medical Systems, Inc. (VAR) : Free Stock Analysis Report
 
Stryker Corporation (SYK) : Free Stock Analysis Report
 
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