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Abaxis (ABAX) Product Portfolio Strong, Competition Rife

On Jun 28, we issued an updated research report on California-based Abaxis, Inc. ABAX. The company manufactures portable Medical (human) and Veterinary (animal) blood analysis systems that provide clinicians with rapid blood constituent measurements in medical and veterinarian markets worldwide. Abaxis currently carries a Zacks Rank #3 (Hold).

Over the past one month, Abaxishas been trading above the Zacks categorized Medical - Products industry. Per the last trading price, the company has gained 8.8%, compared to the 4.6% gain of the broader industry.

We are encouraged to note that Abaxis has been working on expanding its portfolio of rapid test menu over the recent past. Earlier, the company signed a partnership with the American Animal Hospital Association (AAHA) to develop a wellness testing initiative to improve veterinary blood work compliance and implementing preventive care. We believe successful expansion of the product portfolio will boost the top line and help foray into new regions. We also expect the distribution relationship with Henry Schein Animal Health, Patterson Veterinary Supply and Abbott Point of Care to expand its market presence in North America as well as Europe.

Also, the company is successfully selling Piccolo instruments globally. To date, Abaxis’ Piccolo is the only point-of-care technology that can deliver comprehensive diagnostic grade chemistry results within the 15-minute visit window that retailers target. During the third quarter of fiscal 2017, the company sold 200 Piccolo Xpress instruments to Fuzhou Kelian Medical Devices, Ltd., a point-of-care diagnostics distributor based in China. Under the distribution agreement with Abbott , the company continues to sell and distribute Piccolo instruments to Catapult Health LLC and specified customer segments in the U.S. The company’s consistent efforts to capture a lion’s share of the diagnostic test global market are encouraging.

On the flip side, over the last three months, a comparative analysis of Abaxis’ forward P/E (F12M basis) multiple reflects a gloomy picture that might be a cause for investor concern. Abbott currently trades at a P/E ratio of 41.40, overvalued when compared with 21.35 of the Zacks-categorized Medical Product industry. In fact, comparing the company’s current P/E level with its own range (median of 38.1) depicts that the stock is a little overvalued. Also, currency headwinds and a competitive landscape are major dampeners.

Key Picks

A few top-ranked medical stocks are Align Technology, Inc. ALGN, Inogen, Inc. INGN and Accelerate Diagnostics, Inc. AXDX. Notably, Inogen sports a Zacks Rank #1 (Strong Buy), while Align Technology and Accelerate Diagnostics carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Align Technology has an expected long-term adjusted earnings growth of almost 24.1%. The stock added roughly 30.4% over the last three months.

Inogen has a long-term expected earnings growth rate of 17.5%. The stock gained around 21.9% over the last three months.

Accelerate Diagnostics has an expected long-term adjusted earnings growth of 30%. The stock added roughly 12.9% over the last three months.

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