Is the Sirtex Medical Limited share price dirt cheap?

Sirtex Medical Limited (ASX:SRX) shares fell 37% in one day and now trade at just $16.

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Last week, Sirtex Medical Limited (ASX:SRX) shares fell as much as 52% when it was revealed the biotechnology business would not meet expectations.

Source: Google Finance
Source: Google Finance

 

What happened?

On Friday, Sirtex Medical shares plunged as much as 52% (from over $25 to below $13) when it released a statement to the market which set dose sales growth expectations at between 4% and 6% for the first half of this financial year. Last year, it achieved growth of 15%.

Worse still, operating profit is set to fall between 9% and 16%.

The company said an increase in competition in the Americas and issues in other key markets such as Europe, Middle East and Africa rippled through the results.

Are Sirtex Medical shares dirt cheap?

At face value, a seemingly modest decline in sales led to a massive selloff in the Sirtex Medical share price. The company also stated that it had implemented a range of strategic initiatives.

However, the credibility of management is now being called into question after the company's CEO sold around 27% of his shares in the business, just one month earlier, for tax reasons. At the very least, it seems investors should discount their valuation approach.

Nonetheless, at today's price of around $16, Sirtex Medical shares appear to trade at a much more compelling valuation. 

Foolish takeaway

While no one likes to see their shares fall 52% in a day, many investors should now be running the ruler over Sirtex Medical shares, in my opinion. 

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes -- and encourages -- your feedback on Google+, LinkedIn or you can follow him on Twitter @ASXinvest. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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