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




 

Accuray Incorporated ARAY is gaining prominence in the MedTech space, courtesy of solid demand for Radixact & CyberKnife platforms. Moreover, the company has been fortifying its foothold worldwide.

In 2018, the company received regulatory approval from India to sell its flagship Radixact X9 system. Management is optimistic about this development as it will expand Accuray's precision treatment solutions in emerging markets. These apart, the company has a strong presence in India's leading hospitals.

However, Accuray faces cutthroat competition in the radiation-oncology space. In a year's time, this Zacks Rank #3 (Hold) stock has gained 3.1% compared with the industry's 11.1% growth.

So here we take a quick look at Accuray's major headwinds 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, 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.

Software Upgrades

A series of software upgrades has been acting as a key catalyst for Accuray. These upgrades were primarily focused on improvised imaging, faster planning capabilities as well as system connectivity.

Further, software enhancements involved improvisation of CyberKnife treatment planning efficiency. In this regard, it is imperative to mention that Accuray had introduced CTrue iterative reconstruction - an enhanced CT imaging capability for Radixact.

In fiscal 2018, Accuray launched an imaging software for Radixact. Per management, this software offers significant improvement in soft tissue resolution with up to 50% lesser image noise than the previous version. Another important development program for Radixact System is the launch of intra-fraction motion tracking and correction capability.

It is encouraging to note that in second-quarter fiscal 2019, Accuray received the FDA approval for its 510(k)-application motion synchronization on the Radixact treatment system. Notably, motion synchronization has been a unique functional feature of the CyberKnife platform. Meanwhile, the kVCT imaging on Radixact is under development.

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.

Accuray Incorporated Price and Consensus

Accuray Incorporated Price and Consensus | Accuray Incorporated Quote

Key Picks

A few better-ranked stocks in the broader medical space are Surmodics, Inc SRDX, Abbott Laboratories ABT and Cardiovascular Systems, Inc. CSII.

Surmodics has a long-term expected earnings growth rate of 10%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Abbott's long-term earnings growth rate is projected at 11.7%. The stock carries a Zacks Rank #2 (Buy).

Cardiovascular Systems exceeded the Zacks Consensus Estimate in the trailing four quarters, the average being 77.1%. The stock sports a Zacks Rank of 2.

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