Accuray Remains A Perpetual 'Next Year Is Our Year' Story

Core Viewpoint - Accuray's recent fiscal fourth quarter report showed a significant revenue increase, yet the company continues to face challenges in consistent growth and execution, leading to a mixed outlook for future performance [3][4][9] Financial Performance - Revenue for the fourth quarter rose nearly 16% in constant currency, exceeding expectations by about 10% [4] - Product revenue increased by 29% year over year, while service revenue declined by 2% [4] - For the fiscal year, revenue remained flat compared to the previous year, and adjusted EBITDA declined by approximately 18% [5] Market Position and Execution - Accuray has struggled to show real progress, with revenue stagnating between $425 million and $450 million for three consecutive years and a growth rate of less than 2% annually over the past decade [3] - The company has lost 25% of its value over the past five years, while the sector has appreciated by about 75% [3] - Management attributed recent performance issues to a weaker capital equipment market in the U.S., but this explanation is questioned given the performance of competitors [6] Order Growth and Backlog - Gross orders increased by 8% in the fourth quarter, but net orders decreased by 6%, leading to a 5% decline in backlog [6] - Orders improved by 9% in the U.S. and grew by 80% in China, but consistent quarterly net orders of $100 million are deemed necessary for the stock to perform well [6] Future Outlook - Management guided for FY'25 revenue between $460 million and $470 million, indicating only 5% year-over-year growth [7] - Adjusted EBITDA guidance suggests a margin improvement to around 6%, compared to 4.4% last year [7] - Long-term growth projections are around 4% to 5%, with potential upside if the company can replicate success in Japan in other markets [8] Valuation and Investment Considerations - Current valuation estimates suggest shares could be worth around $4 based on free cash flow, with a potential target of $4.50 using a revenue multiple approach [8] - The company faces significant competition and must execute effectively to capitalize on market opportunities, particularly in China and other emerging markets [9]