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Why Short Term Business Results Are Misleading for Somanetics Corp. (SMTS) Stock Value

This stock demonstrates the fallacy of exits based on short-term setbacks in results. Analysts have been unpleasantly surprised by a profit drop during the Most Recent Quarter. The management has toned down its business expectations for the full year. The stock market has responded with severity, as the stock price at the end of the second week of May 2008 was just $16.73 against a 52-week high of $29.53. Discerning investors will disagree with the market and will remain invested in this stock for strategic reasons.

The company provides solutions for medical professionals who need to monitor critically ill patients closely. It makes optical spectroscopy equipment to measure changes in blood oxygen levels on a real time basis. The equipment comes with the company’s proprietary software. The system helps doctors manage patients at risks of restricted blood flow to the brain, muscles, and other vital tissues.

The technology is well established and widely accepted. More than 650 hospitals in the United States have the company’s monitors and software installed and in use. The company also has other lines of revenue related to the management of serious cardiac cases.

The core technologies of the company have enduring benefits for modern healthcare. Purchase decisions tend to be complex and time-consuming in large medical institutions. This may have prompted the management to make conservative forecasts for the rest of 2008. However, sanguine investors will realize the long term values of the stock and stay invested accordingly. That is why the company has embarked on a substantial stock repurchase program.

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