The last quarter earnings showed a decline in revenues and increase in net income. On a sequential basis the net income had declined by 22%. However, the guidance was increased, and that perhaps led to positive movement in the stock. The revenue growth is expected to be between 1 to 3%, and the margins are likely to expand from the existing 17% (ttm) to around 20%. The EPS is likely to be in the range of $2.11 to 2.21. Over the years, the stock has shown good growth and has doubled over the past four years. Even in the last one year it is up by 55% from its 52 week low. At present US sales comprises 78% of the total revenue. Further, the Procedural Systems segment (infection prevention, medical specialties and specialty disposables) contributes 36% to the revenues and Medical Systems (dispensing technologies, infusion systems and respiratory technologies) contributes 64%. The future growth in revenues is dependent on how it is able to bring new innovative products / solutions to the market. A smaller medical device company PLC Systems (PLCSF) has got several patents for its innovative product RenalGuard which is used for prevention of contrast induced nephropathy. Carefusion has products in the pipeline, and is also planning to expand in the other markets outside US. Innovation is nothing new for the company, and it is likely to deliver on this front. Growth in the stock is dependent on the fundamental performance. However, the stock is trading at 22 times ttm earnings and 16 times forward earnings. This indicates a little high valuations, but also indicates growth prospects. The debt is reasonable when compared with the overall liquidity position of the company. Debt has increased over the years to $1.45 billion, but the cash is also high at $1.9 billion. If it can speed up growth and expand margins as per plan, the stock can still reward investors with good appreciation over the next few years.
