Last update on 2024-06-07

OSI Systems (OSIS) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

OSI Systems (OSIS) Piotroski F-Score Analysis for 2023, scoring 6/9. Detailed insights into profitability, liquidity, and operating efficiency.

Short Analysis - Piotroski Score: 6

We're running OSI Systems (OSIS) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

OSI Systems (OSIS) was assessed using the Piotroski F-Score, which evaluates a company's financial strength through nine criteria related to profitability, liquidity, and operating efficiency. OSIS achieved a score of 6 out of 9. The positive factors included a positive net income and cash flow from operations, operating cash flow being greater than net income, increasing current ratio, a decrease in the number of shares outstanding, and an increase in asset turnover. Negative factors included a drop in return on assets, rising leverage, and a decline in gross margin.

Insights for Value Investors Seeking Stable Income

Given a Piotroski F-Score of 6, OSI Systems (OSIS) shows a moderate level of financial health and efficiency. As such, it may be a worthwhile investment for those looking for solid companies but should be approached with some caution. The positive profitability and cash flow trends are promising, but the declining return on assets, rising leverage, and decreasing gross margin suggest potential risks. Investors should consider further research and factor in their own risk tolerance when evaluating this stock.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of OSI Systems (OSIS)

Company has a positive net income?

Net income is a key indicator of a company's profitability and overall financial health. It is crucial to consider because consistent positive net income signals that a company is able to manage its expenses and generate profits.

The Net Income for OSI Systems (OSIS) in 2023 is $91,778,000. This is a positive figure and thus adds 1 point to the Piotroski Score, indicating financial health. Historical data shows fluctuations, including periods of negative net income (e.g., 2005, 2006, 2008, 2018), but recent years from 2019 to 2023 exhibit consistent profitability. This positive trend further strengthens the current year's outlook.

Company has a positive cash flow?

The criterion checks if the Cash Flow from Operations (CFO) is positive, indicating that the company is generating enough cash from its core business activities.

The Cash Flow from Operations (CFO) for OSI Systems (OSIS) in 2023 is $94,812,000, which is positive. This is a good indicator as it signifies that the company is generating sufficient cash from its main business activities. Historically, the company has seen fluctuations in its CFO with negative values in earlier years such as 2004, 2005, and 2006. However, in recent years, OSIS has consistently reported positive cash flows, reflecting stronger operational efficiency and better financial health. The positive trend over the last two decades strengthens investor confidence in the company's ability to maintain and improve its cash-generating capacity.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA): This criterion compares the ROA of the company on a year-over-year basis. An increasing ROA signifies improved efficiency in using its assets to generate profits, which is generally viewed positively by investors.

The ROA for OSI Systems (OSIS) decreased from 0.0816 in 2022 to 0.0612 in 2023, resulting in a score of 0 for this criterion. This downward trend suggests a decline in the efficiency of OSI Systems in generating profits from its assets. For perspective, the industry median ROA in 2023 was 0.2104, indicating that OSI Systems is significantly lagging behind the average performance in its industry. Over the last 20 years, the operating cash flow has also seen fluctuations, with notable increases and decreases, further emphasizing the inconsistency in generating returns from its assets. Therefore, this downturn in ROA is a negative indicator for OSI Systems.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income: This criterion checks OSI Systems (OSIS)'s ability to convert its net income into actual cash flow. This is crucial because it indicates the efficiency of the company's core operations.

In 2023, OSI Systems (OSIS) posted an operating cash flow of $94,812,000 compared to a net income of $91,778,000. This results in a positive trend where the operating cash flow is higher than the net income, translating to 1 point for this criterion. Observing data over the past 20 years, the company has faced occasional inconsistencies, especially with negative figures during the early 2000s. However, a consistent positive pattern from 2009 onwards, combined with a peak in 2012 where operating cash flow stood at $120,563,000, marks a significant recovery. This upward trajectory in 2023 bolsters the company's position in operational efficiency.

Liquidity of OSI Systems (OSIS)

Leverage is declining?

The leverage criterion examines the change in a company's financial leverage, which is calculated as the ratio of debt to equity. It's a measure of financial risk.

Based on the data, OSI Systems' leverage ratio increased from 0.0337 in 2022 to 0.0877 in 2023. This indicates a rise in financial leverage, translating to higher financial risk. Over the last 20 years, the leverage ratio has fluctuated, peaking at 0.2105 in 2020, and hitting troughs near 0 (e.g., 0.0001 in 2004). The increase from 2022 to 2023 means no point is awarded for this criterion according to Piotroski's model as financial risk has heightened.

Current Ratio is growing?

In Piotroski analysis, the Current Ratio is a liquidity ratio that measures a company's ability to pay short-term obligations with its short-term assets. This ratio is crucial as it gives investors an idea of the company's efficiency in managing its working capital. An increasing current ratio is generally seen as a positive development as it indicates improving liquidity.

The Current Ratio for OSI Systems (OSIS) has increased from 1.2153 in 2022 to 1.4691 in 2023. This represents a growth, yielding 1 point in Piotroski analysis. The rise in Current Ratio suggests improved liquidity, making it easier for OSI Systems to cover its short-term liabilities. However, it's noteworthy that over the last 20 years, the average Current Ratio has been higher and the industry median stands at 2.0742 for 2023. While OSIS's ratio shows improvement, it is still below the industry median, highlighting an area for further optimization.

Number of shares not diluted?

Change in Shares Outstanding measures the company's approach towards financing through equity. A decrease hints at share buybacks, favoring EPS.

For OSI Systems (OSIS), the Outstanding Shares in 2022 were 17,551,000, compared to 16,828,000 in 2023. This demonstrates a decrease, which is typically viewed favorably as it signals share buybacks. Historically, the company reached a peak of Outstanding Shares in 2012 (20,330,000) and has consistently reduced the number since then, reflecting a prudent capital management strategy. While specific strategic drivers for the recent year's reduction are not detailed, it usually indicates a prioritization towards enhanced shareholder value through elevated Earnings per Share (EPS). Based on this decrease, we attribute 1 point for this criterion.

Operating of OSI Systems (OSIS)

Cross Margin is growing?

Change in Gross Margin is a crucial metric as it reflects a company's efficiency in managing production costs relative to revenues. An increase in gross margin indicates improved profitability and cost control.

The Gross Margin for OSI Systems (OSIS) has decreased from 35.87% in 2022 to 33.67% in 2023. This decline suggests that the company's cost control may have deteriorated, or operational expenses have increased, impacting its profitability. Historically, OSIS has generally maintained a Gross Margin above 33%, peaking at around 39.03% in 2006, while showing resilience compared to the industry's median, which has ranged from 19.66% to 29.81%. Despite this dip, OSIS's gross margin remains significantly above the industry's median of 21.04% in 2023, indicating competitive strength.

Asset Turnover Ratio is growing?

Assessing the change in Asset Turnover is vital because it indicates how efficiently a company is using its assets to generate revenue. Higher turnover signifies better performance.

The Asset Turnover for OSI Systems (OSIS) increased from 0.8369 in 2022 to 0.8526 in 2023, evidencing an enhancement in operational efficiency. Over the last 20 years, the trend has fluctuated, with a notable decrease starting in 2013 (0.9607). Nonetheless, the recent increase follows a low point in 2022, indicating OSIS may be improving its asset utilization again. Given the provided ratio, 1 point is awarded for this criterion.