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3 Reasons to Hold Accuray (ARAY) Stock in Your Portfolio

Accuray Incorporated ARAY has been gaining on the back of strong demand for its products. A solid fourth-quarter fiscal 2022 performance, along with a few positive study outcomes, is expected to contribute further. However, overdependence on technologies and reimbursement uncertainties persist.

Over the past year, this Zacks Rank #3 (Hold) stock has lost 56.4% compared with a 36.5% decline of the industry and 24% decline of the S&P 500 composite.

This renowned radiation oncology company has a market capitalization of $187 million. Accuray’s earnings per share are projected to grow 100% in fiscal 2023 on the back of a continued increase in revenues. The company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed the same in one, the average surprise being 20.8%.


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Let’s delve deeper.

Strong Product Demand: We are upbeat about Accuray’s products registering robust customer adoption over the past few months. On its fiscal 2022 fourth-quarter earnings call in August, the company confirmed that its top line reflected strong customer demand for its products — ClearRT Helical kVCT Imaging for the Radixact System and VOLO Ultra enhancement to the Accuray Precision treatment planning system for the Radixact System. The company also continued to witness robust customer demand for both CyberKnife S7 and Radixact TomoTherapy platforms.

Positive Study Outcomes: Accuray has been witnessing favorable study outcomes for its products over the past few months, raising our optimism. This month, the company announced new positive clinical studies, which reinforce the value of the company's CyberKnife platform in the treatment of neurological indications with non-invasive radiosurgery.

Accuray, in May, announced that clinical studies continue to validate the versatility of its CyberKnife and TomoTherapy platforms, including the next-generation Radixact System, to accurately and efficiently treat a wide variety of indications of all complexities.

Strong Q4 Results: Accuray’s narrower-than-expected loss per share in fourth-quarter fiscal 2022 buoyed optimism. Favorable phase III trial data on the Accuray TomoTherapy Helical Radiotherapy System and positive 10-year data about Accuray CyberKnife System bode well. The uptick in gross orders during the reported quarter was also encouraging.

Downsides

Overdependence on Technologies: Consumer and third-party payor acceptance of the CyberKnife and TomoTherapy platforms as preferred methods of tumor treatment are crucial to Accuray’s continued success. Physicians will not begin to use or increase the use of CyberKnife or TomoTherapy platforms unless they determine, based on experience, clinical data and other factors, that the two platforms are safe and effective alternatives to traditional treatment methods.

Reimbursement Uncertainties: Accuray’s customers rely significantly on reimbursement from public and private third-party payors for the CyberKnife and TomoTherapy platform procedures. The company’s ability to commercialize its products successfully and increase market acceptance of the same will significantly depend on the extent to which public and private third-party payors provide adequate coverage and reimbursement for procedures performed with Accuray’s products.

Estimate Trend

Accuray is witnessing a stable estimate trend for fiscal 2022. In the past 30 days, the Zacks Consensus Estimate for its earnings per share has been stable at breakeven for fiscal 2023 and 11 cents per share for fiscal 2024.

The Zacks Consensus Estimate for the company’s first-quarter fiscal 2023 revenues is pegged at $105.1 million, suggesting a 2.2% decline from the year-ago quarter’s reported number.

Stocks to Consider

Some better-ranked stocks in the broader medical space are ShockWave Medical SWAV, AMN Healthcare Services AMN and McKesson MCK. While ShockWave Medical and AMN Healthcare Services sport a Zacks Rank #1 (Strong Buy), McKesson carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Estimates for ShockWave Medical’s earnings per share rose from $2.02 to $2.57 for 2022 and from $2.95 to $3.42 for 2023 in the past 60 days. SWAV has gained 45.1% so far this year.

ShockWave Medical delivered an earnings surprise of 180.14%, on average, in the last four quarters.

Estimates for AMN Healthcare Services have improved from earnings of $10.41 to $11.26 for 2022 and $7.94 to $8.30 for 2023 in the past 60 days. AMN stock has declined 14.9% so far this year.

AMN Healthcare Services delivered an earnings surprise of 15.66%, on average, in the last four quarters.

McKesson’s earnings per share estimates increased from $23.27 to $24.42 for fiscal 2023 and $25.41 to $26.04 for fiscal 2024 in the past 60 days. MCK has gained 39.6% so far this year.

McKesson delivered an earnings surprise of 13.00%, on average, in the last four quarters.


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