In a sliding market, OSI Systems has defied the odds, trading up to $178.81 per share. Its 22.9% gain since October 2024 has outpaced the S&P 500’s 7% drop. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.

Is it too late to buy OSIS? Find out in our full research report, it’s free.

Why Does OSI Systems Spark Debate?

With security scanners deployed at airports and borders worldwide and patient monitors used in hospitals across the globe, OSI Systems (NASDAQ: OSIS) designs and manufactures specialized electronic systems for security screening, patient monitoring, and optoelectronic applications.

Two Positive Attributes:

1. Long-Term Revenue Growth Shows Momentum

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, OSI Systems’s 6.4% annualized revenue growth over the last five years was decent. Its growth was slightly above the average business services company and shows its offerings resonate with customers.

2. Outstanding Long-Term EPS Growth

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

OSI Systems’s EPS grew at a spectacular 14% compounded annual growth rate over the last five years, higher than its 6.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

One Reason to be Careful:

Free Cash Flow Margin Dropping

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

As you can see below, OSI Systems’s margin dropped by 18.4 percentage points over the last five years. If the trend continues, it could signal it’s in the middle of a big investment cycle. OSI Systems’s free cash flow margin for the trailing 12 months was negative 5.6%.

Final Judgment

OSI Systems has huge potential even though it has some open questions, and with its shares beating the market recently, the stock trades at 19.3× forward price-to-earnings (or $178.81 per share). Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.

Stocks We Like Even More Than OSI Systems

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