Why OSI Systems (OSIS) Stock Is Climbing This Morning

NEW YORK (TheStreet) --Shares of OSI Systems Inc. (OSIS) are higher by 5.13% to $66.97 in mid-morning trading on Monday after the company announced it was awarded a $102 million contract from the U.S. Department of Defense.

The company, which designs and manufactures specialized electronic systems and components for critical applications, will supply multiple units of its cargo and vehicle inspection systems, and related training, spare parts, services, and logistics support for Iraq.

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Separately, TheStreet Ratings team rates OSI SYSTEMS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate OSI SYSTEMS INC (OSIS) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, expanding profit margins, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.0%. Since the same quarter one year prior, revenues slightly increased by 2.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has significantly increased by 977.23% to $48.85 million when compared to the same quarter last year. In addition, OSI SYSTEMS INC has also vastly surpassed the industry average cash flow growth rate of 69.38%.
  • 41.24% is the gross profit margin for OSI SYSTEMS INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 2.35% trails the industry average.
  • OSIS's debt-to-equity ratio is very low at 0.07 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that OSIS's debt-to-equity ratio is low, the quick ratio, which is currently 0.69, displays a potential problem in covering short-term cash needs.
  • OSI SYSTEMS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, OSI SYSTEMS INC reported lower earnings of $2.15 versus $2.25 in the prior year. This year, the market expects an improvement in earnings ($3.10 versus $2.15).
  • You can view the full analysis from the report here: OSIS Ratings Report
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