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Here's Why ViewRay Is on the Upswing Today

Brian Feroldi, The Motley Fool
Updated

What happened

In response to reporting of strong first-quarter results, shares of ViewRay (NASDAQ: VRAY), a medical equipment company that sells the MRIdian Linac system, jumped 15% as of 2:00 p.m. EDT on Friday.

So what

Here are the key numbers from the quarter:

  • Sales dropped 22% to $20.3 million. That was behind the $21 million that Wall Street was expecting.

  • Net loss ballooned to $33.4 million, or $0.34 per share. That was far worse than the $0.22 loss that market watchers had predicted.

  • The company received seven new orders for MRIdian systems during the period, which represents $42.8 million in future revenue. That was up substantially from the three orders that were received in the year-ago period.

  • Total backlog rose to $237.5 million at quarter-end.

  • Cash balance at quarter-end was $146 million.

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Management reaffirmed its guidance for the full year. That guidance calls for total revenue to land between $111 million and $124 million, while total cash usage is expected to be in the range of $65 million to $75 million.

MRI technician looking at three computer monitors.
MRI technician looking at three computer monitors.

Image source: Getty Images.

Traders appear to be focusing their attention on the strong MRIdian system sales and are willing to look past the weak quarterly results.

Now what

It takes a long time to sell and install a MRIdian system, so it makes sense that the company's quarterly results will fluctuate wildly from time to time. For that reason, it makes sense to judge this company's performance on a full-year basis.

If ViewRay can hit the midpoint of its full-year revenue guidance, the company will produce top-line growth of about 45% this year. That's quite strong in absolute terms, but it is still nowhere close to allowing the company to become profitable.

ViewRay remains an exciting growth stock today, but since this business is still burning through capital, it remains exceptionally risky. For that reason, my plan is to monitor this company's progress from the safety of the sidelines.

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Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.