Why MiMedx Group Shares Are Crashing

Source: MiMedx Group

What: After reporting third quarter financial results that failed to win over investors, shares in MiMedx Group fell 26% earlier today

So what: Earlier this month, the maker of tissue grafts used to promote faster healing and reduce scarring issued preliminary third quarter results that included a forecast for fourth quarter revenue that was below what the market was expecting.

Now, the company has reported its final third quarter numbers, and those numbers are doing little to reignite investor enthusiasm.

Specifically, MiMedx reported sales in Q3 totaled $49 million, up 46% year-over-year, and EPS of $0.06.

The company also reaffirmed its fourth quarter outlook for sales of $49.5 million to $52.5 million and its full year forecast for sales of between $185 million and $188 million.

Now what: Investors hoping for a boost in guidance from the guidance already issued a few weeks ago may be disappointed, but investors may want to bear in mind that MiMedx' outlook is far from unhealthy. If MiMedx delivers sales of $185 million, it will be up significantly from $118.2 million in sales delivered last year. Moreover, unlike many other fast-growing, small cap healthcare companies, MiMedx is already profitable, and its earnings are expected to improve next year as rising demand is leveraged against fixed costs.

Source: Yahoo Finance

Regardless, MiMedx stock is likely to remain highly volatile, and that means that even bargain hunters need to be OK with the potential for further downside. However, MiMedx could be an intriguing stock for investors who are willing to accept the risk -- especially since management, while shying away from offering up an outlook for 2016, did say in its earnings release that it's comfortable with analysts' current consensus outlookfor sales of about $242 million next year.

The article Why MiMedx Group Shares Are Crashing originally appeared on Fool.com.

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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