Why Shares of Accuray Incorporated Missed Their Mark

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Accuray have dropped by 16% today after the company's after-hours earnings report on Thursday revealed weaker full-year projections than investors had expected.

So what: Accuray's fiscal third quarter resulted in $97.5 million in revenue and a net loss of $0.04 per share. While the company's top line was weaker than Wall Street's expectations for $102.7 million, its loss per share was narrower than the $0.06 loss per share Wall Street had expected.

However, it was Accuray's updated full-year guidance that seems to have sent investors scurrying. The radiation therapy specialist now expects its total revenue for the 2015 fiscal year to range from $375 million to $385 million, down from an earlier range of $390 million to $410 million and well below Wall Street's consensus estimate of $394.2 million in full-year revenue. The company's adjusted EBITDA guidance was also slashed from an earlier range of $18 million to $27 million to a weaker range of $13 million to $16 million.

Now what: Accuray's new guidance ranges compare rather unfavorably to its 2014 fiscal year, which produced $369.4 million in revenue and $13.3 million in adjusted EBITDA. At the high end of its guidance ranges, Accuray would only improve its top line by 4% over last year's result. While EBITDA might grow by up to 20%, it might even shrink on a year-over-year basis if Accuray can only reach the low end of its guidance range.

Today's drop ruins what had been a generally flat 52 weeks of trading for Accuray's stock, and investors are now holding a 14% loss for the past year. Since Accuray does not seem poised to outgrow its cash-bleeding ways just yet, it's hard to call that drop a buying opportunity. I'd wait for a clearer picture of growth and profitability before moving into this downtrodden stock.

The article Why Shares of Accuray Incorporated Missed Their Mark originally appeared on Fool.com.

Alex Planes has no position in any stocks 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.

Copyright 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.