Stock Analysis

Is It Time To Consider Buying Abiomed, Inc. (NASDAQ:ABMD)?

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NasdaqGS:ABMD
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Let's talk about the popular Abiomed, Inc. (NASDAQ:ABMD). The company's shares saw a decent share price growth in the teens level on the NASDAQGS over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Abiomed’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Abiomed

Is Abiomed still cheap?

Abiomed is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 64.16x is currently well-above the industry average of 51.17x, meaning that it is trading at a more expensive price relative to its peers. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Abiomed’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Abiomed look like?

earnings-and-revenue-growth
NasdaqGS:ABMD Earnings and Revenue Growth December 22nd 2020

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 21% over the next couple of years, the future seems bright for Abiomed. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? ABMD’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe ABMD should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on ABMD for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for ABMD, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Since timing is quite important when it comes to individual stock picking, it's worth taking a look at what those latest analysts forecasts are. At Simply Wall St, we have the analysts estimates which you can view by clicking here.

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What are the risks and opportunities for Abiomed?

Abiomed, Inc. engages in the research, development, and sale of medical devices to assist or replace the pumping function of the failing heart.

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Rewards

  • Revenue is forecast to grow 13.08% per year

  • Earnings grew by 78.9% over the past year

Risks

  • Earnings are forecast to decline by an average of 2.5% per year for the next 3 years

  • Large one-off items impacting financial results

  • Volatile share price over the past 3 months

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