OSI Systems trades at $259.45 and has moved in lockstep with the market. Its shares have returned 10.5% over the last six months while the S&P 500 has gained 14.4%.

Is OSIS a buy right now? Find out in our full research report, it’s free for active Edge members.

Why Are We Positive On OSI Systems?

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.

1. Skyrocketing Revenue Shows Strong Momentum

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, OSI Systems grew its sales at an impressive 9.2% compounded annual growth rate. Its growth surpassed 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 14.9% compounded annual growth rate over the last five years, higher than its 9.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

3. Increasing Free Cash Flow Margin Juices Financials

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 expanded by 2.4 percentage points over the last five years. We have no doubt shareholders would like to continue seeing its cash conversion rise as it gives the company more optionality. OSI Systems’s free cash flow margin for the trailing 12 months was 7.3%.

Final Judgment

These are just a few reasons OSI Systems is a rock-solid business worth owning, but at $259.45 per share (or 25× forward P/E), is now the time to initiate a position? See for yourself in our in-depth research report, it’s free for active Edge members.

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