Varian Medical Systems

Varian Medical Systems Inc (NYSE:VAR)

Varian Medical Systems, Inc., is the world's leading manufacturer  of medical devices and software for treating cancer and other medical conditions with radiotherapy, radiosurgery, proton therapy, and brachytherapy.
The company supplies informatics software for managing comprehensive cancer clinics, radiotherapy centers and medical oncology practices.  Varian is a premier supplier of tubes  and digital detectors for X-ray imaging in medical, scientific, and industrial applications and also supplies X-ray imaging products for cargo screening and industrial inspection.   Varian Medical Systems employs approximately 4,300 people who are located at manufacturing sites in North America and Europe and in its 56 sales and support  offices around the world.  The company has a market cap of $1.7 billion.

Trilogy® is the newest generation of cancer-fighting technology, combining three modalities in one piece of equipment.  Available first in Connecticut at Hartford Hospital, Trilogy precisely pinpoints the exact
location of the cancer and treats it with a highly accurate beam of radiation. Trilogy's Stereotactic
Radio Surgery (SRS) function delivers a large dose of radiation to a very small and highly focused area, using a number of intersecting beams from multiple directions.
Advance planning and precision physics are necessary to isolate the tumor and ensure that nearby
healthy tissue is spared.  The result for the patient is precise and powerful treatment with faster recovery. The Varian On-Board Imager makes it possible for clinicians to image and treat on a single machine
that rotates around the patient to take X-ray images and deliver treatments from virtually any angle.  Mounted on a Clinac® medical linear accelerator the OBI device produces high-resolution X-ray images of the tumor and tracks changes in tumor shape, size or position over a multi-week course of treatment.  It also enables clinicians to track and adjust for tumor motion caused by the patient's breathing during treatment sessions.

Prior to the advent of image-guided radiotherapy (IGRT), radiation oncologists had to contend with
variations in patient positioning and with respiratory motion by treating a relatively large margin of healthy tissue around the tumor.  This increased the risk of complications from the treatment and forced doctors  to use lower, less effective doses in their treatments.  IGRT enables doctors to minimize the volume of healthy tissue exposed to the treatment beam, giving them the option of using higher  doses when the patient needs them.

The stock has fallen on hard times this year, as earnings suffered and competitors moved ahead in technology.  Recently the company announced that it is opening a new hub for its international locations in Switzerland. This provides for significant tax benefits, but additionally, it provides Varian Medical with a centrally located strategic base in Europe.  Varian has also made great strides in increasing the capacity of its own technology, while at the same time improving its bottom-line profitability.  While the company increased its revenue guidance for the third quarter,  the profit expectation decreased because of one-time tax charges.  Varian's revenue is on the rise, and future tax rates will be lower from the restructuring in Europe after the one-time charges. This now puts Varian Medical in the same ballpark with competitors such as Koninklijke Philips Electronics, an Amsterdam-based electronics company involved in health care, medical systems and technology, and  Sony, which also competes in this area.

The company's stock has exceptionally strong fundamentals, including a 33% return on equity and an operating cash flow of $255.7 million.  If orders are stable or increase, the company could very well beat analysts' expectations over the next few years.  At its current price, Varian looks a great buy.

Buy Varian Medical Systems (NYSE:VAR) up to $45.