2 Long-Term Goals From Accuray's Management

Accuray Incorporated ARAY hosted its Analyst Day last week. Brean Capital’s Jason Wittes maintained a Buy rating for the company, with a price target of $12, saying that the meeting was upbeat and focused on the company’s longer-term transformative strategies.

Fiscal Discipline At Accuray

Accuray’s financial management has improved, with the company going from burning $80 million in cash in F2013 to the expectation of $25-$30 million in cash generation in 2016. This enabled to company to raise straight debt of $70 million to replace convertible debt that was due in 2016, thereby avoiding the 13 percent shareholder dilution that would have taken place from the additional 10.6 million shares, analyst Jason Wittes mentioned.

Accuray has generated a revenue CAGR of 8 percent in F2013-F2016, compared to market growth of 2-3 percent. During this period, the company’s installed base grew 16 percent and backlogs rose 28 percent.

“Despite these clear signs of improvement, the company’s stock performance has been marred by the volatility in orders. Some of this is self-inflicted, but, in light of these improvements, we do see the stock getting a new life as it moves to positive EBITDA and EPS,” Wittes wrote.

LT Goals

The analyst said that management had provided these longer-term goals:

1. Continued growth at 2-3x market
2. Over the next 3-4 years, the company’s profitability goals call for EBITDA growth of 15 percent, up from the current 7 percent, operating income growth of 15 percent, up from -1 percent, and gross margins to expand to from 40 percent to ~45 percent