ABMD Case Study

JXM Case Study

Company: ABIOMED, Inc. – ABMD

Run Date: 3/24/16 – priced at $90.60

Abiomed-ABMD-LogoRun Date: 3/24/16

Company Background

ABIOMED, Inc. engages in the research, development, and sale of medical devices to assist or replace the pumping function of the failing heart. It also provides continuum of care to heart failure patients. It also manufactures and sells AB5000 circulatory support system for temporary support of acute heart failure patients in profound shock, including patients suffering from cardiogenic shock after a heart attack, post-cardiotomy cardiogenic shock, or myocarditis. In addition, the company engages in the research, development, prototyping, and the pre-serial production of a percutaneous expandable catheter pump, which enhances blood circulation from the heart with an external drive shaft. It sells its products through direct sales and clinical support personnel in the United States, Canada, Europe, and Japan. ABIOMED, Inc. was founded in 1981 and is headquartered in Danvers, Massachusetts.  This background summary comes from yahoo.com.

JXM Background

ABMD was selected for this case study as a follow up to our recent LGND report.  Like LGND, ABMD shined brightly in our March 24th, 2016 stock run, dominating nearly every JXM stock measure.  The company made it through the JXM 75 pre-screener with a 1st overall rank and continued as the top scorer in the JXM 24 screener.  The company also made it through JXM’s toughest secondary screener that isolates companies with superior Sum5, Sum7, Technical, Guru, and Rules scores. This selection criteria weeds out even the best companies and yields a success rate between 52% and 100%, depending on how long the stock is held (from 5 to 90 days).

JXM Report – The Basics

The following table (Figure 1) is a score card for ABMD from the March JXM stock report.  The table summarizes its JXM individual scores and ranks, along with the Sum7 and Sum5 scores of its top competitors.

Figure 1

ABMDpic1

ABMD is a strong overall scorer in the JXM database, winning two categories and finishing in the top five in three others.  Its Fundamental and Rules scores dominated at 80% and above.  It also combined strong performances in Technical, Guru, and Classic Growth.  Further, it placed second in the Sum5 score along with a top ranked Sum7 score.  Like LGND, the only mark against them is a negative New Growth score, which kept ABMD from winning a perfect Sum 7 score.  Again, this level is not highly correlated in the Healthcare field.

JXM Report – The Heart

The follow table (Figure 2) summarizes the heart of the JXM database, with highlights of levels 1-6.  Again, dominance of ABMD shows through.

Figure 2

ABMDpic2

ABMD completely dominates the Fundamental scorecard, winning six of the ten core fundamental measurements and placing in the top ten in two others.  It is rare to see a company this powerful in Level 1, dominating its peers and the industry in JXM scoring, while also benefiting from a solid financial footing boosted by its profitable product and skilled management.  ABMD does show some weakness in share statistics and valuation, but it prevails with uniform strength in nearly all other categories.

ABMD places third with its Technical score, backed with buy opportunities in our short, medium, and long term measures.  It sits nicely above its 20 and 200 sma, suggesting a solid growth opportunity after  a sluggish six-month return.  Aside from a bearish RSI, there are few warning signs among these technical ratios.

ABMD has a solid 75% score in valuation, but places only 13th among its peers, whose stock prices are obviously priced well below their potential.  Analysts believe there is potential stock growth of 14-25% which is solid upside.  However, the JXM valuation calculations are not as strong as those shown by LGND, with negative Upper and Lower potential as well as FCFE valuation.  While these weak values are less than ideal, its competitive overall valuation score encourages the JXM team.

The Guru score for ABMD is a robust 63%, high enough to earn it second place in this category.  Obviously the experts feel the same about this stock as the JXM database.

The Rules score for ABMD is an outstanding 88%, high enough to win this level too.  It passes nearly all of our most important rules, with no debt along with consistent revenue growth, strong return on equity, and healthy cash flow.  Its only weakness is high institutional ownership, suggesting that the overall market is also aware of this stock.

The growth score for ABMD is also near the top of its class, reaching a top five ranking.  Its yearly growth chart and composite score show consistent gains in all four measures, resulting in a score above 93%.  Its quarterly growth was also fairly impressive, with a rebound from a recent fall in earnings per share.  The JXM team would recommend that this chart be check again after the next earnings report in May.

Price Potential

While history doesn’t always repeat, it is worthwhile for the JXM investor to be aware of potential seasonality.  The following table and chart (Figure 3) attempts to measure such historic patterns, summarizing how this stock has performed over 5 and 10 year averages.  The table measures 3-4 month intervals beginning form the stock run, while the chart summaries price movement on a monthly basis.

Figure 3

ABMDpic3

In this case,  the 5 and 10 year average performances for ABMD are mixed.  There is a short term warning sign for May, with negative price movement over both 5 and 10 year averages.  However, the overall stock history does reflect general strength, especially the monthly performance with only 4 down months all year.

Price Movement

The March ABMD run and healthcare in general were extremely strong, with LGND, ABMD, TECH and ALGN all able to emerge from JXM’s toughest secondary screener.  All four companies had very strong

price performance after the run.  The following table (Figure 4) is a summary these results measured at 5, 10, 15, 30, 45, 60, 75, and 90 day intervals starting from the date of the run.

Figure 4

Date Ticker 5 10 15 30 45 60 75 90
3/24/16 ABMD 2.8% 6.6% 6.2% 12.4% 4.8% 7.1% 15.1% 12.3%
3/24/16 ALGN 3.2% 4.0% 4.0% 5.2% 6.4% 10.2% 12.3% 14.5%
3/24/16 LGND 2.3% 8.2% 13.4% 27.0% 16.3% 16.4% 12.4% 11.0%
3/24/16 TECH -1.1% 0.5% -2.1% -0.2% 6.2% 10.9% 19.2% 17.4%
Average 1.78% 4.80% 5.41% 11.09% 8.39% 11.13% 14.76% 13.79%

As can be seen from this run, all four companies posted strong price movement, with only TECH displaying short-term price weakness.

The following chart (Figure 5) shows the stock price versus the S&P 500, with a circle marking the stock run date.

ABMDpic4

As can be seen from Figure 5, ABMD experienced rapid growth through late April of 2016 while closely mirroring the S&P 500.  However, the stock did drop off in late April and was relatively flat through May before taking back off later in the month.  The stock reported its earnings in early May of 2016, which highlights a common requirement of JXM, to reevaluate a stock after its earnings report to search for any score drops or other warning signs.  In this case, the savvy JXM investor would have with repurchased or purchased more shares after the May earnings report and would have been rewarded with a nearly 8% short-term gain.

Conclusion

By nearly any measure, ABMD dominated the March 2016 stock analysis, a rare find in the JXM evaluation process.  It posted well rounded strength in all JXM categories, from financial and technical health as well as a solid Rules score.  Those that purchased this stock would not be disappointed with their gains.  While its high institutional ownership suggests that the big players are aware of this stock, one should not ignore any company that posts such dominate scores.  If this company maintains such this position, it will remain a long term hold.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s