Tickers in this Article: ABAX
Although shares have fallen after the Q3 report, the stock still looks pricey at 33x forward earnings. Investors should consider waiting for earnings momentum to turn around before investing.Abaxis, Inc. manufactures portable point-of-care blood analysis systems for use in veterinary and human patient-care settings.Third Quarter ResultsAbaxis reported disappointing Q3 earnings on October 22. Earnings per share came in at 18 cents, missing the Zacks Consensus Estimate of 20 cents. Earnings growth was flat compared with the same quarter last year.Revenues rose 4% year-over-year to $45.9 million, which was short of the $48.0 million consensus. Total sales in the veterinary market were up 8% to $37.9 million.Despite the increase in revenues, gross profit declined 5% as the gross margin fell 480 basis points to 47.7% of revenue. Total operating expenses improved 304 basis points, however, to 35.3% of revenues. But operating income still fell 9% year-over-year.Estimates FallingFollowing its second consecutive earnings miss, analysts revised their estimates meaningfully lower for Abaxis, as you can see in its 'Price & Consensus' chart:It is a Zacks Rank #5 (Strong Sell) stock.Based on consensus estimates, analysts project a 31% decline in EPS in 2013. But they expect a rebound in earnings in 2014 to $1.18, corresponding with 39% EPS growth.Premium ValuationShares of Abaxis are down more than 6% since the Q3 earnings report. Despite the decline, the valuation picture still does not look attractive. Shares currently trade at a rich 33x 12-month forward earnings, well above the industry median of 23x. Its price to sales ratio of 4.1 is also well above its peers at 2.6.The Bottom LineWith soft top-line growth, declining profit margins, falling earnings momentum and premium valuation, investors should wait to establish a position in Abaxis until its earnings momentum turns around.Todd Bunton, CFA is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.Abaxis (ABAX) reported its second straight earnings miss on October 22 as revenue came in below expectations and profit margins contracted. Analysts revised their estimates meaningfully lower for both 2013 and 2014 after the latest miss, sending the stock to a Zacks Rank #5 (Strong Sell).