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

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·4 min read
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  • ARAY
  • BSX-PA
  • TMO

Accuray Incorporated ARAY has been gaining recently on the back of a series of software upgrades and solid global expansion. However, tough competition has been offsetting the positives to an extent.

In the past three months, shares of Accuray have gained 39.3% compared with the industry’s growth of 7.3%.

With a market capitalization of $284.5 million, the company designs, develops and sells radiosurgery and radiation therapy systems for the treatment of tumors in the body. The company has a trailing four-quarter earnings surprise of 38.6%, on average.

Let’s delve deeper into the factors that substantiate the company’s Zacks Rank #3 (Hold), at present.

A Suite of Software Upgrades: A series of software upgrades has been driving growth for Accuray. In recent times, the company announced the VOLO Optimizer software upgrade for CyberKnife, which reduces treatment time by up to 50%, allowing CyberKnife treatments to be performed in 15 to 30 minutes.

In February 2020, the company installed the first CyberKnife M6 System in Mercy Hospital, St. Louis, Missouri. This next-generation CyberKnife System can deliver accurate stereotactic radiosurgery (SRS) and stereotactic body radiation therapy (SBRT) treatments with ease, thereby enabling  the clinical team to expand access to one of the most advanced methods for administering radiation to more cancer patients.

In the fiscal fourth quarter, CyberKnife accounted for approximately 30% of gross orders and nearly 25% of the quarter's revenue unit volumes. During the quarter, the company achieved full commercial launch of the Synchrony Motion management upgrade on Radixact. Accuray has been seeing a strong interest in Synchrony from existing Radixact customers who are getting treatment for complex SBRT cases.

In June 2020, Accuray introduced the CyberKnife S7 System — the next-generation CyberKnife platform. This new CyberKnife technology is the most recent instance of the company’s innovation in radiation therapy that enables healthcare providers in offering the best care to patients on new capabilities. This new system is likely to boost Accuray’s CyberKnife Systems product line.

Global Reach: Accuray has been fortifying its foothold globally. With regard to Type A shipments, management expects to see initial revenue impact in the first half of fiscal 2021. With regard to the Type B segment of the China market, the company continues to progress with a Made-in-China product for the Type B segment. Operationally, the company has made solid progress in readying its production capabilities in Tianjin. The JV manufacturing facility there is now complete, with manufacturing qualification and in-country required testing expected to finish in the first quarter of calendar year 2021.

During the fourth quarter of fiscal 2020, the company shipped a total of nine Synchrony upgrades and installed three of these upgrades in the Japan market alone. It witnessed 4% revenue growth in Japan, primarily banking on an increase in upgrade revenues related to Synchrony on Radixact.

However, there is a concerning factor.

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, Elekta AB, Mitsubishi Heavy Industries, ViewRay and BrainLAB AG in this market. The CyberKnife System faces stiff challenge from Varian’s Trilogy system, while TomoTherapy systems are challenged by Varian’s RapidArc technology and the TrueBeam systems.

Which Way Are Estimates Headed?

For fiscal 2021, the Zacks Consensus Estimate for revenues is pegged at $362.8 million, suggesting a decline of 5.3% from the year-ago figure. For adjusted loss per share, the same stands at 17 cents.

Key Picks

A few better-ranked stocks from the broader medical space include Boston Scientific BSX, DaVita DVA and Thermo Fisher Scientific TMO.

Boston Scientific’s long-term earnings growth rate is estimated at 10%. The company presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DaVita’s long-term earnings growth rate is estimated at 11.9%. The company presently carries a Zacks Rank #2.

Thermo Fisher’s long-term earnings growth rate is estimated at 15.5%. It currently carries a Zacks Rank #2.

Zacks’ Single Best Pick to Double

From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.

With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.

The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.

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