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Bull of the Day: OSI Systems (OSIS)

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OSI Systems (OSIS - Free Report) is a name that is flying under the radar for most investors, but not those that follow my Bull of the Day articles! OSIS was the Bull of the Day back on October 18 ( of-the-day-osi-systems-osis) prior to the most recent earnings report.

Let's take a look at why I like this stock, the most recent earnings report and why it is again a Zacks Rank #1 (Strong Buy) and the Bull of the Day.


This is a small-cap stock which would outperform if the market moves higher.

A good earnings history when compared to the Zacks Consensus Estimate.

From May to August there were consistent monthly increases in the Zacks Consensus Estimate for 2016.

Recent beat and raise quarter tells me a "post earnings drift higher" is very likely.

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The Recent Numbers

I like to do a review of the most recent quarter for stocks that I highlight as Bulls of the Day. OSIS reported the September 2016 quarter last week and guided higher.

The important idea behind a beat and raise quarter is that it is like a six-month surprise all in one day. In beating the number, the company let of know that the previous 90 days were better than expected. In guiding higher, the company let's us know that the next 90 days are going to be better than what was previously expected. This means that we received 6 months of good news all at once!

The most recent quarter was a beat on top and on bottom. The company posted EPS of $0.44 when the Zacks Consensus Estimate was calling for $0.35. Revenue came in $31M ahead of expectations for a 16.5% positive revenue surprise. As a result, the stock was bid up by more than 8.5% in the session following the report.


OSI Systems makes electronic systems and components. The company's Security segment provides baggage and parcel inspection, cargo and vehicle inspection, hold baggage and people screening, radiation detection and explosive and narcotics trace detection systems. The company was founded in 1987 and is headquartered in Hawthorne, California.

Earnings History

The company has a good history of beating the Zacks Consensus Estimate. There have been two miss and four beats in the last six reports.


The estimate picture looks really good, with the Zacks Consensus Estimate for 2016 moving from $2.49 in May to $2.51 in July and reached $2.64 in September. The estimate now stands at $2.78 following the most recent report.

The 2017 number finally moved following the recent earnings release. The Zacks Consensus Estimate for 2017 inched higher by one cent to $3.46.


Investors are looking at a slightly mixed picture when it comes to the valuation for OSIS. The forward earnings multiple of 26x is ahead of the 19x industry average. The price to book multiple of 2.5x is below the industry average of 2.8x, but the price to sale multiple of 1.6x is higher than the 1.2x industry average.

As I look at revenue and earnings growth, I see why the company is trading at higher earnings and sales multiples. The company is simply growing the top line at a faster rate than the industry, with growth of 7% expected for fiscal 2017 compared to an industry average of 0.6% revenue growth. This big revenue growth translates into expected earnings growth of 31% whereas the industry is looking at 22% EPS growth over the same time period (fiscal 2017).


Zacks has developed a chart that helps investors see how earnings estimates have impacted the price of the stock over the last several years. We call this chart the price and consensus chart, and each color-coded line represents analyst estimates over a designated year. As estimates increase, the stock tends to follow. The Zacks Rank is impacted by earnings estimate increases, beats and incorporates the idea of analyst agreement and magnitude. As a Zacks Rank #1 (Strong Buy) we see that estimates are moving higher.

OSI SYSTEMS INC Price, Consensus and EPS Surprise

OSI SYSTEMS INC Price, Consensus and EPS Surprise | OSI SYSTEMS INC Quote

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