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On Feb 22, we issued an updated research report on Mountain View, CA-based Omnicell Inc. (OMCL - Free Report) . The company develops and markets end-to-end automation solutions for the medication-use process.
Over the last three months, Omnicell’s share price has been trading below the Zacks categorized Medical Info Systems industry. The stock gained 6.3%, as compared with 6.4% of the broader industry. Omnicell exited fiscal 2016 on a disappointing note. The company’s earnings declined on a year-over-year basis and revenues missed the Zacks Consensus Estimate. Also, the deterioration in fourth-quarter earnings as well as full-year margins adds to the woes.
Apart from the quarterly debacle, the estimate revision trend for the current quarter remains unfavorable with one estimate moving down and no revision in the opposite direction over the past one month. Earnings estimates have also moved substantially down from 9 cents over this period to a loss of 30 cents per share. The trend reflects analyst apprehensions over the stock’s performance in the near term.
Just like Omnicell’s share price underperformed the broader market over the last three months, a comparative analysis of the company’s forward P/E (F12M basis) multiple represents a relatively gloomy picture that might be a cause for investors’ concern. The multiple currently stands at 42.85, a bit stretched when compared to its own range (median of 34.71). Moreover, even when compared to the market at large, the comparison is unfavorable as the current P/E (F12M basis) for the S&P 500 is at 18.29 and the median level is 17.69 over the last three months. We believe the company’s recent developments including the Ateb acquisition, tie-ups and substantial expansion in the non-acute care space will keep the valuation stretched for some time.
Management has adopted several strategies to drive its top line including portfolio expansion, acquisitions and further penetration in the medication adherence market. Thus, the company continues to battle escalating costs. During the fourth quarter, Omnicell witnessed a 40.3% surge in operating expenses. Thus, the company’s margin got affected as well.
On a positive note, with the growing significance of medication non-adherence, Omnicell is making substantial expansion in the non-acute care space. The company is also currently progressing well with its three-pronged growth strategy. We are also encouraged by the Aesynt acquisition that has expanded Omnicell’s share in the medication automation and analytics market. The fourth quarter was a robust one for Aesynt products. Nevertheless, post the Aesynt takeover, management’s confidence in delivering significant revenue and earnings growth over the coming years, bolsters our confidence in the stock.
Zacks Rank & Key Picks
Omnicell currently has a Zacks Rank #4 (Sell). Better-ranked medical stocks are Glaukos Corporation (GKOS - Free Report) , Cardiovascular Systems and Neogen Corp. (NEOG - Free Report) . Glaukos sports a Zacks Rank #1 (Strong Buy) while Cardiovascular Systems and Neogen carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Glaukos gained over 100% in the last one year in comparison to the S&P 500’s gain of 21.1%. The company has a stellar four-quarter average earnings surprise of over 100%.
Cardiovascular Systems surged over 100% in the last one year in comparison to the S&P 500. It has a four-quarter average earnings surprise of 67.8%.
Neogen gained 29.6% in the past one year, better than the S&P 500 mark. The stock has an impressive long-term earnings growth rate of 16.7% for the next five years compared to the industry average of 15.2%.
Zacks' Top 10 Stocks for 2017
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Omnicell: Q4 Report Disappoints, Aesynt Buyout Holds Promise
On Feb 22, we issued an updated research report on Mountain View, CA-based Omnicell Inc. (OMCL - Free Report) . The company develops and markets end-to-end automation solutions for the medication-use process.
Over the last three months, Omnicell’s share price has been trading below the Zacks categorized Medical Info Systems industry. The stock gained 6.3%, as compared with 6.4% of the broader industry. Omnicell exited fiscal 2016 on a disappointing note. The company’s earnings declined on a year-over-year basis and revenues missed the Zacks Consensus Estimate. Also, the deterioration in fourth-quarter earnings as well as full-year margins adds to the woes.
Just like Omnicell’s share price underperformed the broader market over the last three months, a comparative analysis of the company’s forward P/E (F12M basis) multiple represents a relatively gloomy picture that might be a cause for investors’ concern. The multiple currently stands at 42.85, a bit stretched when compared to its own range (median of 34.71). Moreover, even when compared to the market at large, the comparison is unfavorable as the current P/E (F12M basis) for the S&P 500 is at 18.29 and the median level is 17.69 over the last three months. We believe the company’s recent developments including the Ateb acquisition, tie-ups and substantial expansion in the non-acute care space will keep the valuation stretched for some time.
Management has adopted several strategies to drive its top line including portfolio expansion, acquisitions and further penetration in the medication adherence market. Thus, the company continues to battle escalating costs. During the fourth quarter, Omnicell witnessed a 40.3% surge in operating expenses. Thus, the company’s margin got affected as well.
On a positive note, with the growing significance of medication non-adherence, Omnicell is making substantial expansion in the non-acute care space. The company is also currently progressing well with its three-pronged growth strategy. We are also encouraged by the Aesynt acquisition that has expanded Omnicell’s share in the medication automation and analytics market. The fourth quarter was a robust one for Aesynt products. Nevertheless, post the Aesynt takeover, management’s confidence in delivering significant revenue and earnings growth over the coming years, bolsters our confidence in the stock.
Zacks Rank & Key Picks
Omnicell currently has a Zacks Rank #4 (Sell). Better-ranked medical stocks are Glaukos Corporation (GKOS - Free Report) , Cardiovascular Systems and Neogen Corp. (NEOG - Free Report) . Glaukos sports a Zacks Rank #1 (Strong Buy) while Cardiovascular Systems and Neogen carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Glaukos gained over 100% in the last one year in comparison to the S&P 500’s gain of 21.1%. The company has a stellar four-quarter average earnings surprise of over 100%.
Cardiovascular Systems surged over 100% in the last one year in comparison to the S&P 500. It has a four-quarter average earnings surprise of 67.8%.
Neogen gained 29.6% in the past one year, better than the S&P 500 mark. The stock has an impressive long-term earnings growth rate of 16.7% for the next five years compared to the industry average of 15.2%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>