Abaxis Inc Cheap on Comp Basis, but Still Extremely Pricey – ValueWalk Premium

Abaxis Inc Cheap on Comp Basis, but Still Extremely Pricey

Abaxis Inc Cheap on Comp Basis, but Still Extremely Pricey


Abaxis Inc (NASDAQ:ABAX) is a US company that was founded in 1989 and is headquartered in Union City, California. The company develops, manufactures, and markets portable blood analysis systems for use in the human or veterinary patient-care setting. The Company’s systems provide clinicians with rapid blood constituent measurements. The company conducts its manufacturing, warehousing, research and development, regulatory, sales and marketing and administrative activities from its headquarters in US. We market and sell our products worldwide by maintaining direct sales forces and through independent distributors. The Company has a strong customer base in United States, Europe and Japan.

Stock Snapshot

As of September 21st 2012, Abaxis Inc.’s common stock closed at USD 37.23. The company has 21.93 million shares outstanding. The stock has total market capitalization of USD 816.30 million. The stock has traded within a range of USD 21.67 – USD 40.58 over the last 52 weeks. Over the last 3 months the stock has seen an average volume of 115,278. On 21st September 2012, the stock closed at a trailing P/E ratio of 60.83, a P/B ratio of 4.91 and P/S ratio of 4.97.

Industry Snapshot

As of 21st September 2012, the average P/E ratio of the diagnostic substance sector for health industry 179.60 and a P/B ratio of 4.99. Of the major competitors of Abaxis Inc (NASDAQ:ABAX); Meridian Bioscience, Inc. (NASDAQ:VIVO) has been trading at a price of USD 19.31 with a P/E multiple of 25.41 and total market capitalization of USD 796.96 million. Neogen Corporation (NASDAQ:NEOG); another player in the Diagnostic substance sector is trading at a P/E ratio of 42.37 and a market capitalization of USD 941.66 million.

Financial Highlights


In the quarter ended 30th June’ 2012, the Company recorded total revenues of USD 42 million compared; registering a phenomenal YOY increase of 17%. The growth in revenues was mainly driven by growth in revenue from instrument sales (31%) and growth in consumable sales (10%) compared to the same quarter last year.

Gross Profit

Gross Profit of the company increased by 19% YOY compared to the same period last year and was recorded at USD 22.8 million with the increase mainly attributable to product mix in the veterinary market.

Operating Expenses

The selling and marketing costs of the company increased YOY by 29% during the 1QFY12 compared to last year mainly due to the promotional and marketing spending related to the Abaxis Veterinary Reference Laboratories which is a full-service laboratory testing facility. General and administration expenses declined by 3% YOY in 1QFY2013 as compared to the same quarter last year. The costs in 1QFY12 were higher due to start up costs incurred to develop Abaxis Veterinary Reference Laboratories.

Bottom Line

Earnins per share (EPS) of the company increased from USD 0.10 per share in 1QFY2012 to USD 0.13 per share in 1QFY2013 representing an increase of 30% as a result of the significant jump in company revenues.

Capital Adequacy

As of 30th June 2012, the company had total cash balance of USD 78.06 million which represents a cash value of USD 3.56 per share. The debt to equity ratio of the company was recorded at 0.52 and book value per share was registered at USD 7.51 as of 30th June 2012.


Value Investors should watch out for this stock due to the following developments

* Sales growth of 16.7% during the most recent quarter which bodes well for the company’s prospects and justifies the relatively high P/E ratio of 60.83….(the P/E ratio of the company is lower than the P/E ratio of the 179.6 for the diagnostic substance sector in the health care industry)..!

* There has been continued growth in pet ownership and increasing willingness to spend on pet services including healthcare which bodes well for the veterinary services industry and market players like Abaxis Inc (NASDAQ:ABAX) are set to benefit!

However, the stock on a standalone basis is still very expensive using PE and most other valuation metrics.


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