Here's Why You Should Hold Accuray Stock in Your Portfolio for Now

Accuray Incorporated ARAY is well-poised for growth in the coming quarters, courtesy of continued robust demand for its products. The optimism, led by robust global performance in the third quarter of fiscal 2025 and potential in the Radiosurgery Market, is expected to contribute further. However, reimbursement uncertainties and challenges related to tariff impacts are concerning.This Zacks Rank #3 (Hold) company has lost 37.9% in the year-to-date period compared with an 11% decline in the industry. The S&P 500 has witnessed 1.2% growth in the said time frame.The renowned radiation oncology company has a market capitalization of $125.7 million. Accuray predicts 106.3% growth for fiscal 2025 and anticipates maintaining its strong performance going forward. The company has a P/S ratio of 0.3X compared with the industry’s 2.5X.Image Source: Zacks Investment ResearchReasons Favoring Accuray’s GrowthSolid Product Demand Driving Growth:  Accuray’s third-quarter fiscal 2025 results show strong and steady demand for its advanced radiation therapy systems, with total net revenues rising 12% year over year to $113.2 million and product revenue climbing 16% to $57 million, driven by a 23% jump in unit sales. Solid demand across both developed and emerging markets, along with a broad product mix and a book-to-bill ratio exceeding 1.2x, points to strong future revenue potential.With a $452 million backlog and no canceled orders, customer confidence remains solid, backed by a mix of new purchases and replacements for older systems, which accounted for 35% of orders. Management emphasized that product revenue is growing faster than the market, while the service segment—which makes up nearly half of total revenue—continues to support margins and drive sustainable growth.Strength in CyberKnife System: Accuray’s CyberKnife System is a robotic radiosurgery platform designed to treat tumors throughout the body, supported by over two decades of clinical evidence. It is especially effective for diseases located in the head, skull base, and spine. Its precision, backed by Synchrony real-time tumor tracking and ClearRT high-quality imaging, makes it suitable for treating cancers, benign tumors, and functional diseases. The system's strong clinical reputation was further reinforced by a recent study published in the International Journal of Cancer, which highlighted its effectiveness and efficiency in treating brain stem metastases.In the fiscal second quarter, CyberKnife delivered more than 50% year-over-year revenue growth, significantly outpacing market trends. This growth was driven by increasing global adoption, particularly in China and Japan, where demand for advanced, precise treatment options is high. Recent regulatory approvals for the CyberKnife S7 system in China have further strengthened its presence in the Type A premium segment, positioning it as a leading solution in the radiosurgery market.Solid Q3 Results: Accuray’s third-quarter fiscal 2025 earnings and revenues beat their respective estimates. Per the third-quarter earnings call, Accuray's growth was primarily driven by strong revenue growth, supported by robust demand across both developed and emerging markets. An increase in product revenue, attributed to a 23% rise in unit volume and strong uptake of their expanded product portfolio, along with growth in service revenue, played key roles.The company achieved a healthy book-to-bill ratio of over 1.2x, with 35% of orders from equipment replacements and the rest from capacity expansions, indicating sustainable customer demand. Operational improvements, effective pricing strategies, and a focus on working capital efficiency also contributed to profitability.Factors That May Offset the Gains for ARAYTariffs Pose Significant Near-Term Risk: Accuray is likely to face material near-term headwinds due to recently imposed tariffs impacting its product shipments to China. Despite robust demand in the region, management expects minimal shipments to China in the fiscal fourth quarter, citing an estimated revenue impact of $10–$15 million. While the company is actively pursuing mitigation strategies, the uncertainty and timing around these efforts remain unresolved. Services revenue is more insulated from tariff effects, but product revenue is likely to take a hit.Though Accuray maintained its fiscal 2025 adjusted EBITDA guidance, this outlook depends heavily on offsetting China losses with contributions from other regions. The volatility surrounding trade policy, combined with constrained visibility into Chinese operations, introduces downside risk to both revenue growth and margin stability in the short term.Reduced Product Orders and Backlog Pressure: Accuray experienced a notable decline in gross product orders during the third quarter of fiscal 2025, with orders falling to $71.2 million from $89.1 million in the same period the previous year, representing a 20% decrease. This reduction contributed to a lower book-to-bill ratio of 1.2 compared with 1.8 a year earlier, signaling softer near-term demand relative to shipments. The company’s order backlog also contracted by about 10%, from approximately $503 million to $452 million, reflecting the impact of evolving global dynamics, including tariff-related disruptions and market uncertainties.ARAY’s Estimate TrendAccuray has been witnessing a stable estimate revision trend for fiscal 2025. Over the past 30 days, the Zacks Consensus Estimate for earnings has remained stable at 1 cent per share.The Zacks Consensus Estimate for fourth-quarter fiscal 2025 revenues is pegged at $124.5 million, indicating a 7.3% decline from the year-ago reported number.Key PicksSome better-ranked stocks in the broader medical space that have announced quarterly results are CVS Health Corporation CVS, Integer Holdings Corporation ITGR and AngioDynamics ANGO.CVS Health, carrying a Zacks Rank of 2 (Buy), reported first-quarter 2025 adjusted earnings per share (EPS) of $2.25, beating the Zacks Consensus Estimate by 31.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Revenues of $94.59 billion outpaced the consensus mark by 1.8%. CVS Health has a long-term estimated growth rate of 11.4%. Its earnings surpassed estimates in each of the trailing four quarters, with an average surprise of 18.1%.Integer Holdings reported first-quarter 2025 adjusted EPS of $1.31, beating the Zacks Consensus Estimate by 3.2%. Revenues of $437.4 million surpassed the Zacks Consensus Estimate by 1.3%. It currently sports a Zacks Rank of 1.Integer Holdings has a long-term estimated growth rate of 18.4%. ITGR’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 2.8%.AngioDynamics, currently sporting a Zacks Rank #1, reported a third-quarter fiscal 2025 adjusted EPS of 3 cents against the Zacks Consensus Estimate of a 13-cent loss. Revenues of $72 million beat the Zacks Consensus Estimate by 2%.ANGO has an estimated fiscal 2026 earnings growth rate of 27.8% compared with the S&P 500 Composite’s 10.5% growth. AngioDynamics’ earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 70.9%.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in the coming year. While not all picks can be winners, previous recommendations have soared +112%, +171%, +209% and +232%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Accuray Incorporated (ARAY): Free Stock Analysis Report AngioDynamics, Inc. (ANGO): Free Stock Analysis Report CVS Health Corporation (CVS): Free Stock Analysis Report Integer Holdings Corporation (ITGR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks