Here's Why You Should Hold Accuray Stock in Your Portfolio for Now

Accuray (ARAY) reported solid Q3 FY25 results with total revenues up 12% to $113.2 million, driven by a 16% increase in product revenues and strong demand for its CyberKnife System which saw over 50% growth. Despite this, the company faced a 20% decline in gross product orders, leading to a 10% reduction in its backlog to $452 million and a lower book-to-bill ratio of 1.2x, indicating softening near-term demand. While Accuray anticipates 106.3% earnings growth for FY25 and trades at a low P/S of 0.3x, its stock has declined 31.3% year-to-date, reflecting market apprehension regarding order contraction and broader uncertainties like tariffs and reimbursement.

Analysis

Accuray Incorporated (ARAY) presents a conflicting profile, marked by strong recent execution but deteriorating forward-looking indicators. The company reported a robust third quarter for fiscal 2025, with total revenues climbing 12% year-over-year to $113.2 million, driven by a 16% increase in product revenues and a 23% rise in unit sales. This performance was largely fueled by the CyberKnife System, which saw over 50% revenue growth in the prior quarter and gained significant traction from regulatory approval in China. However, these positive results are overshadowed by a 20% decline in gross product orders, which has compressed the order backlog by 10% to $452 million. Consequently, the book-to-bill ratio has weakened from 1.8x to 1.2x, signaling that new business is not keeping pace with current shipments and points to potential future revenue deceleration, a concern echoed by the consensus estimate for a 7.3% revenue decline in Q4. The stock's 31.3% year-to-date loss reflects this investor apprehension, though its low price-to-sales ratio of 0.3x, compared to the industry's 2.5x, may attract value-oriented investors if order trends reverse.

Key Decisions for Investors

• Investors should treat the 20% drop in gross product orders and the contracting backlog as critical leading indicators, as sustained weakness here could negate the positive impact of recent revenue growth and the strong 106.3% FY25 earnings growth forecast.
• Given the stock's significant underperformance and low 0.3x P/S ratio, a potential value thesis hinges on the turnaround of order momentum; monitor the next earnings report for any stabilization or recovery in the book-to-bill ratio.
• Consider the dichotomous outlook: while the CyberKnife system's expansion in China represents a significant long-term growth catalyst, near-term risks from tariff impacts and reimbursement uncertainty are actively suppressing the order book and pressuring the stock.