1. The Move
Abiomed’s all-time low occurred in December, 14th, 1994, at $2 per share:
However, I find it more useful to study the situation from March 2009, low of $4.67:
It’s still nearly a one-hundred-bagger.
2. Business Description
Based in Danvers, Massachusetts, USA, Abiomed, Inc. is a leading provider of medical devices that provide circulatory support. Our products are designed to enable the heart to rest by improving blood flow and/or performing the pumping of the heart. For additional information, please visit www.abiomed.com.
3. Fundamental Situation at the 2009 Bottom
4. Fundamental Situation at the 2018 Top
5. Brief Story
At the 2009 bottom, Abiomed had meaningful annual Revenues at $73 M, which were growing at about 18% CAGR. The Price to Sales Ratio was reasonable at 2.2 times, and we can say the same about the Price to Book Value at 1.4 times. The Balance Sheet looked healthy, with a $57 M Net Cash position.
However, the company was deeply in the red in terms of EBITDA and Net Income.
Revenue kept growing year after year (26.5% CAGR from 2009 to 2019), and Abiomed turned marginally profitable in 2012 (just $1.5 M net income), while the stock closed that year at $13.44. Net income rose tenfold in 2013 and kept growing to $259 M in fiscal 2019.
As it happens so often, investors got overly enthusiastic since, at the top, the sales multiple was 27, the earnings multiple was 82, and the price to book value was 23!
What we had at the 2009 low was a company with strong revenue growth, a healthy balance sheet, reasonably valued, but losing money. When it turned profitable, it was already up a lot from the lows, and then, with the growth continuing, the valuation multiples expanded to ridiculous levels.
Abiomed is going through a severe drawdown now, as the stock is down 63% from the top: