Bravo To Abaxis Management For Delivering Organic Growth

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Operating income increased over 32% on a year-over-year basis.

Sales team performed impressively as compared to existing customer accounts, VetScans, hematology analyzers, i-STAT and VSpro instruments were sold to more new customer accounts.

ABAX is scheduled to release its VETSYNC connective solution in December, which would likely improve user experience and attract additional customers.

Five analysts have established a price target of $63.4 of ABAX, which currently offers a 26.27% upside potential to investors.

There is a Disconnect between Revenue Growth and Stock Price of Abaxis


Figure 1: Disconnect Between Abaxis Revenue and Stock Price

When we first took a look at what is happening with Abaxis Inc (NASDAQ:ABAX), it did not make any sense. Investors seem to be completely discounting the fact that over the last two quarters, its top line has improved near to its Q4 2014 levels.

This provider of blood analysis systems has lost the bulk of its market valuation since the start of Q2 2015, after its quarterly revenue fell from $59.5 million in Q4 2014 to $52.02 million in Q1 2015, representing only 7.5% drop. However, in response to this “normal” top line fluctuation, the market pushed the price of the stock from $66.54 per share on March 30, 2015, to $41.60 per share on October 22, 2015, which translates into a 37.48% decrease off the high in 2015.

Abaxis Top Line Continued to GrowAlthough Abaxis Inc has three sources of revenue, the bulk of the revenue comes from its veterinary segment. Last quarter, the veterinary segment contributed around 83% of its total sales. Similarly, although Abaxis Inc markets its products in the international market, the bulk of its sales happen in the North American market, which represents around 81% of its overall sales.

Last quarter, Abaxis Inc’s veterinary sales and North American sales went up by around 10% and 10.5%, respectively. Moreover, its international sales were up around 14.5%. But, this figure does not properly reflect the actual international growth, as the strong performance of the US Dollar against other major currencies, on average, affected the revenue by as much as 15% in the Q3 2015.

Regardless, Abaxis Inc management was able to push the revenue to $55.98, which is representing a rather impressive 11% year-over-year improvement.

Operational Efficiency Also Increased


Figure 2: Quarterly EBITDA Has Increased by 6.96% Since the Start of 2015

Besides impressive top line growth, the Abaxis Inc management also demonstrated improved efficiency. For example, gross margin has increased to 57.10% compared to 52.71% in the Q3 2014. On the other hand, EBITDA has reached $12.17 million, which represents 6.96% year-to-date improvement.

Operating Income

Figure 3: Operating Income Has Increased by 32.91% Compared to Same Quarter Last Year

The real improvement in performance of Abaxis Inc can be observed, if we take a look at the quarterly operating income of the company, which grew from only $8.75 million in Q1 2015 to $12.17 million in the last quarter. Compared to the same quarter last year, this is a 32.91% improvement in operating income.

Moreover, as the Chief Operating Officer of Abaxis Inc, Donald Wood said during the earnings call, EPS is up 37% on a year-over-year basis as well.

How Abaxis Managed to Deliver Such Impressive Growth?

Compared to last year’s one-time instrument sales, in 2015, Abaxis Inc experienced more of an organic growth. Even after correcting for those one-time sales, the CEO of Abaxis Inc, Clinton Severson, claimed that net growth topped 20% on a year-over-year basis.

As the bulk of the revenue of Abaxis Inc comes from its veterinary segment, we looked into this area first. During Q3 2015, Abaxis Inc placed 391 VetScans and 298 hematology analyzers in the market, where 55% and 73% of these two products were sold to new customer accounts. Moreover, i-STAT and VSpro instrument product lines also grew, where 88% of the products were sold to new customers. Hence, the credit completely goes to the sales team that contributed heavily by growing its customer base.


The short term prospects of Abaxis Inc look good. The company has a few new products in the pipeline. For example, it has scheduled the launch of a state-of-the-art rapid reader on January 2016. Also, its VETSYNC connective solution is about to enter the market by December 1, 2015.

We are especially expecting users of Abaxis Inc to grow further as the VETSYNC will dramatically improve the user experience in regards to viewing and sharing test results.

Earlier on September 24, 2015, almost a month before Abaxis Inc released its Q3 2015 financial results, 5 analysts established a price target of $63.4 for its stocks. Currently, the stock is trading at $50.21 ((as of October 30, 2015)), and offering a 26.27% upside potential to investors.