Abaxis, Inc. (ABAX) reported an EPS of $0.10 in the first quarter of fiscal 2012, 37.5% down from the year-ago quarter as well as the Zacks Consensus Estimate of $0.16. The company has been witnessing several challenges that led to continued sluggish growth of the company's sales. Moreover, margins continued to disappoint due to increased expenses in both medical and veterinary markets.
We are also apprehensive based on Abaxis' dependency on distributors to sell its products. Although there is immense potential in the human and veterinary diagnostic market, we are concerned about the company's soft international sales, competitive pressure as well as exposure to patent issues which could have an adverse effect on its top line.
Consequently, we maintain our Underperform recommendation for Abaxis. Abaxis' current trailing 12-month earnings multiple is 42.2X, compared to the 24.3X average for the peer group and 16.4X for the S&P 500.
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