Have you been paying attention to shares of OSI Systems (OSIS)? Shares have been on the move with the stock up 6.5% over the past month. The stock hit a new 52-week high of $121.38 in the previous session. OSI Systems has gained 51.3% since the start of the year compared to the 31.8% move for the Zacks Computer and Technology sector and the 4% return for the Zacks Electronics – Miscellaneous Components industry.
What’s Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn’t missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on April 27, 2023, OSI reported EPS of $1.49 versus consensus estimate of $1.47.
For the current fiscal year, OSI is expected to post earnings of $6.10 per share on $1.25 billion in revenues. This represents a 4.99% change in EPS on a 5.74% change in revenues. For the next fiscal year, the company is expected to earn $7.08 per share on $1.37 billion in revenues. This represents a year-over-year change of 16.12% and 9.82%, respectively.
Valuation Metrics
OSI may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
OSI has a Value Score of B. The stock’s Growth and Momentum Scores are B and F, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 19.7X current fiscal year EPS estimates, which is a premium to the peer industry average of 18.7X. On a trailing cash flow basis, the stock currently trades at 14.3X versus its peer group’s average of 12.9X. Additionally, the stock has a PEG ratio of 1.79. This isn’t enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to consider the stock’s Zacks Rank, as this supersedes any trend on the style score front. Fortunately, OSI currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if OSI fits the bill. Thus, it seems as though OSI shares could have a bit more room to run in the near term.
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OSI Systems, Inc. (OSIS) : Free Stock Analysis Report
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