OSI Systems (OSIS) AI Stock Analysis

• Market Cap: $3.39B
• Dividend Yield: N/A
• Average Volume (3M): 272.71K
• Price to Earnings (P/E): 25.9
• Beta (1Y): 1.32
• Revenue Growth: 20.69%
• EPS Growth: 17.89%
• Country: US
• Employees: 6,681
• Sector: Technology
• Sector Strength: 62
• Industry: Hardware, Equipment & Parts
• EPS (TTM): 7.78
• Shares Outstanding: 16,799,282
• 10 Day Avg. Volume: 173,340
• 30 Day Avg. Volume: 272,709
• PEG Ratio: 1.45
• Price to Book (P/B): N/A
• Price to Sales (P/S): 1.97
• Price to Cash Flow (P/CF): 15.50
• P/FCF Ratio: 19.20
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $219.75
• Price Target Upside: 8.96% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 4

OSI Systems exhibits strong financial performance with robust revenue growth and profitability, but cash flow management remains an area of concern. Positive earnings call results and increased guidance bolster confidence, while technical indicators show moderate upward momentum. The stock's valuation appears fair, though the lack of a dividend may deter some investors.

Positive Factors

Contract Wins

The company is already benefiting from its RF acquisition, with a $23 million contract win to deploy long-range radio frequency communications for the US government.

Financial Performance

Days Sales Outstanding has decreased significantly, indicating easing headwinds related to unbilled receivable balances, and is expected to continue decreasing throughout FY2025.

Market Presence

OSIS has the number-1 market share at the US/Mexico and the US/Canada borders for Non-Intrusive Inspections solutions.

Negative Factors

Revenue Decline

While revenue from Mexico is coming down off its peak, it is confident that it will be able to fill that gap with additional work, allowing the company to provide a continued strong outlook.

Valuation Concerns

The stock is up 28% YTD vs 4% for the S&P 500, and valuation is nicely above the historical average, so analysts are inclined to be patient.

OSI Systems Business Overview & Revenue Model

Company Description

OSI Systems, Inc. designs and manufactures electronic systems and components worldwide. It operates in three segments: Security, Healthcare, and Optoelectronics and Manufacturing. The Security segment offers baggage and parcel inspection, cargo and vehicle inspection, hold baggage and people screening, radiation detection, and explosive and narcotics trace detection systems under the Rapiscan Systems, AS&E, and Gatekeeper names. It also provides site design, installation, training, and technical support services; and security screening solutions under the S2 name. The Healthcare segment offers patient monitoring and diagnostic cardiology systems, and related supplies and accessories under the Spacelabs name for use in critical care, emergency, and perioperative areas within hospitals, physicians' offices, medical clinics, and ambulatory surgery centers. The Optoelectronics and Manufacturing segment provides optoelectronic devices under the OSI Optoelectronics, OSI LaserDiode, OSI Laserscan, Semicoa, and Advanced Photonix names for the aerospace and defense, avionics, medical imaging and diagnostics, biochemistry analysis, pharmaceutical, nanotechnology, telecommunications, construction, and homeland security markets. It also offers electronics manufacturing services to original equipment manufacturers and end users for medical, automotive, defense, aerospace, industrial, and consumer applications under the OSI Electronics, APlus Products, Altaflex, and PFC names; and LCD displays for medical, industrial, and consumer electronics applications, as well as flex circuits for OEM customers. This segment offers laser-based remote sensing devices to detect and classify vehicles in toll and traffic management systems under the OSI Laserscan and Autosense names; and solid-state laser products for aerospace, defense, telecommunication, and medical applications under the OSI LaserDiode name. The company was incorporated in 1987 and is headquartered in Hawthorne, California.

How the Company Makes Money

OSI Systems generates revenue primarily through the sale of its products and services within its three business segments. The Security segment provides security screening systems, turnkey security screening solutions, and related services to airports, ports, and border crossings, contributing significantly to the company's revenue. The Healthcare segment earns revenue by offering patient monitoring, cardiology, and anesthesia delivery systems to hospitals and medical facilities. The Optoelectronics and Manufacturing segment generates income through the production of various components and subsystems for use in defense, aerospace, medical, and industrial applications. Additionally, OSI Systems benefits from long-term service agreements, maintenance contracts, and strategic partnerships with governmental and private entities worldwide, which further bolster its earnings.

OSI Systems Financial Statement Overview

Summary

OSI Systems shows strong revenue growth and profitability with a robust balance sheet. However, cash flow management is a concern, especially with negative operating and free cash flows.

Income Statement

OSI Systems demonstrates strong financial performance with consistent revenue growth, evident from a 29% increase from 2023 to TTM (Trailing-Twelve-Months). The gross profit margin is healthy at 33.5%, and the net profit margin has improved to 8.2% in the TTM period. The EBIT and EBITDA margins also reflect solid profitability at 12.6% and 14.4%, respectively. However, the company should remain vigilant about maintaining these margins amidst industry volatility.

Balance Sheet

The balance sheet indicates a robust equity position with a debt-to-equity ratio of 0.01, signifying low leverage. The equity ratio stands at 38.8%, showcasing financial stability. Although the return on equity (ROE) is decent at 16.3%, the decline in stockholders' equity from 2023 suggests a need to monitor equity performance closely.

Cash Flow

Cash flow analysis highlights challenges in cash generation, with a negative operating cash flow of -$65.7 million in the TTM period. The company also reported negative free cash flow. While the operating cash flow to net income ratio is concerning, the firm is actively managing financing activities, likely to support operations and investments.

Breakdown
TTM	Jun 2024	Jun 2023	Jun 2022	Jun 2021	Jun 2020
Income Statement		Total Revenue
1.65B	1.54B	1.28B	1.18B	1.15B	1.17B
	Gross Profit
552.93M	530.46M	430.51M	424.43M	419.92M	420.64M
	EBIT
207.92M	189.06M	135.28M	121.75M	81.62M	61.61M
	EBITDA
237.17M	230.72M	173.79M	167.97M	159.23M	154.65M
	Net Income Common Stockholders
134.48M	128.15M	91.78M	115.35M	74.05M	75.25M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
46.34M	95.35M	76.75M	64.20M	80.61M	76.10M
	Total Assets
493.99M	1.94B	1.56B	1.44B	1.38B	1.27B
	Total Debt
38.06M	521.55M	359.57M	353.24M	277.27M	327.00M
	Net Debt
-8.28M	426.20M	282.82M	289.04M	196.65M	250.90M
	Total Liabilities
188.82M	1.07B	829.52M	804.73M	744.55M	696.39M
	Stockholders Equity
305.17M	863.48M	726.16M	638.42M	639.82M	572.15M
Cash Flow		Free Cash Flow
-88.10M	-126.93M	62.56M	33.32M	109.56M	95.43M
	Operating Cash Flow
-65.73M	-87.50M	94.81M	63.81M	139.07M	129.18M
	Investing Cash Flow
-113.39M	-37.64M	-40.46M	-12.67M	-34.69M	-42.69M
	Financing Cash Flow
156.38M	144.25M	-37.17M	-64.01M	-103.92M	-104.73M

OSI Systems Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 201.68
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For OSIS, the sentiment is Positive. The current price of 201.68 is above the 20-day moving average (MA) of 189.89, above the 50-day MA of 194.18, and above the 200-day MA of 166.82, indicating a bullish trend. The MACD of 1.37 indicates Negative momentum. The RSI at 57.73 is Neutral, neither overbought nor oversold. The STOCH value of 83.71 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for OSIS.

OSI Systems Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
OSIS	72 Outperform	$3.39B	25.93	16.85%	―	20.69%	17.89%
BL	67 Neutral	$2.98B	21.21	45.56%	―	10.74%	200.08%
Sector *	59 Neutral	$10.72B	10.22	-6.67%	3.02%	7.42%	-11.38%
POWI	55 Neutral	$2.88B	88.96	4.29%	1.62%	-5.75%	-41.75%
GBTG	55 Neutral	$3.24B	―	-12.22%	―	5.81%	17.19%
LPL	52 Neutral	$2.95B	―	-37.33%	―	17.34%	34.72%
SMTC	51 Neutral	$2.60B	―	-137.83%	―	4.66%	84.78%

OSI Systems Corporate Events

OSI Systems Expands Board and Appoints New CEO

OSI Systems, Inc. has expanded its Board of Directors to seven members, appointing Ajay Mehra as a new director effective January 1, 2025. Ajay Mehra will also assume the roles of President and CEO with a starting salary of $750,000. The company has outlined specific terms in Mr. Mehra’s employment agreement regarding his compensation and benefits upon termination. Additionally, OSI Systems held its Annual Meeting of Stockholders where all six nominated directors were elected, and Grant Thornton LLP’s appointment as the independent registered public accounting firm was ratified.