Value
6.1/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 5.2 |
| P/S | 9.0 |
| EV/EBITDA | 2.5 |
| Fwd P/E | 6.9 |
| PEG | 5.0 |
| Analyst target | 7.5 |
- ▸Forward P/E: 18.4x
- ▸PEG: 1.55
OSIS · Why this verdict
Why OSI Systems (OSIS) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score4.9/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
OSI Systems has a strong earnings beat streak and 35% analyst upside, but weak growth, very low free cash flow conversion at 24% of net income, high short interest of 17%, and an overall score of 4.8 place it in a cautious hold position with limited upside conviction.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Free cash flow is only 24% of net income, a red-flag earnings quality indicator suggesting that reported profits substantially overstate actual cash generation, potentially due to aggressive revenue recognition or high capital expenditure requirements. Quality breakdown | Free cash flow conversion rises above 50% of net income within 4 reported quarters. | →Stable |
| CounterSecurity screening equipment companies often have elevated receivables cycles related to government contract timing, making temporary low FCF conversion less indicative of structural problems. | ||
OSI Systems beat earnings estimates in 3 of the last 4 quarters, including beats of 3.1% and 1.6% in fiscal Q4 and Q2 2025, indicating consistent operational execution despite a complex security screening product portfolio. Earnings | Earnings beats continue in at least 2 of the next 4 quarters with positive surprise above 2%. | ↓Deteriorating |
| CounterAverage earnings surprise of only 0.4% across the 4 quarters indicates the beat streak is narrow and could easily reverse if revenue or margin assumptions change slightly. | ||
Analyst consensus price targets imply 35% upside to $261.25, suggesting strong institutional conviction in OSI Systems' long-term security screening and healthcare technology positioning. Sentiment breakdown | Price appreciates by at least 15% toward the analyst target within 12 months. | ↑Improving |
| CounterHigh short interest of 17% reflects substantial institutional conviction in the bearish case, directly contradicting the bullish analyst targets. | ||
Short interest at 17% of float indicates significant bearish positioning by professional market participants who believe the stock's current valuation overstates the business outlook. Key risks | Short interest falls below 10% within 12 months as the business demonstrates sustainable earnings growth above current consensus. | ↑Improving |
| CounterHigh short interest in security technology companies often relates to government contract timing uncertainty rather than fundamental business deterioration. | ||
Free cash flow is only 24% of net income, a red-flag earnings quality indicator suggesting that reported profits substantially overstate actual cash generation, potentially due to aggressive revenue recognition or high capital expenditure requirements.
→StableQuality breakdown
- Expectation
- Free cash flow conversion rises above 50% of net income within 4 reported quarters.
CounterSecurity screening equipment companies often have elevated receivables cycles related to government contract timing, making temporary low FCF conversion less indicative of structural problems.
OSI Systems beat earnings estimates in 3 of the last 4 quarters, including beats of 3.1% and 1.6% in fiscal Q4 and Q2 2025, indicating consistent operational execution despite a complex security screening product portfolio.
↓DeterioratingEarnings
- Expectation
- Earnings beats continue in at least 2 of the next 4 quarters with positive surprise above 2%.
CounterAverage earnings surprise of only 0.4% across the 4 quarters indicates the beat streak is narrow and could easily reverse if revenue or margin assumptions change slightly.
Analyst consensus price targets imply 35% upside to $261.25, suggesting strong institutional conviction in OSI Systems' long-term security screening and healthcare technology positioning.
↑ImprovingSentiment breakdown
- Expectation
- Price appreciates by at least 15% toward the analyst target within 12 months.
CounterHigh short interest of 17% reflects substantial institutional conviction in the bearish case, directly contradicting the bullish analyst targets.
Short interest at 17% of float indicates significant bearish positioning by professional market participants who believe the stock's current valuation overstates the business outlook.
↑ImprovingKey risks
- Expectation
- Short interest falls below 10% within 12 months as the business demonstrates sustainable earnings growth above current consensus.
CounterHigh short interest in security technology companies often relates to government contract timing uncertainty rather than fundamental business deterioration.
Per-dimension breakdown
Quality
4.9/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 5.7 |
| ROA | 4.0 |
| Gross margin | 2.6 |
| Op margin | 5.2 |
| Net margin | 4.2 |
| Current ratio | 9.8 |
| FCF quality | 1.9 |
| Moat | 4.2 |
| Piotroski F | 6.7 |
- ▸Earnings quality RED FLAG: 24% FCF/NI
- ▸No competitive moat
Growth
2.2/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 3.0 |
| EPS growth | 1.4 |
Momentum
1.9/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 3.5 |
| MACD | 0.0 |
| OBV | 1.0 |
| MA position | 1.5 |
| Volume | 3.5 |
- ▸Volume distribution (falling OBV)
- ▸Below 200-MA, MA slope flat
Sentiment
7.9/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 7.0 |
| Analyst rating | 7.7 |
| Price target | 9.2 |
- ▸LLM news sentiment: +0.40 (n=1)
- ▸Light analyst coverage (7.0) — signal dampened
- ▸Analyst upside: 42%
Insider
6.7/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 3.0 |
| holder change | 10.0 |
| notable moves | 7.0 |
- ▸Notable insider selling — $5,636,800 (0.162% of mkt cap)
- ▸Institutions accumulating
Peer rank
4.2/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 7.5 |
| quality rank | 7.1 |
| growth rank | 1.0 |
- ▸Attractive P/E vs peers
Technical
7.1/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 9.2 |
| support resistance | 8.7 |
| 52w position | 3.5 |
Risk (lower is worse)
4.0/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 1.5 |
| days to cover | 1.9 |
| volatility | 3.7 |
| beta | 6.2 |
| debt equity | 4.7 |
| news risk | 6.0 |
- ▸High short interest: 17%
Catalyst
5.7/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 3.7 |
| news activity | 5.0 |
- ▸Perfect beat streak: 4Q
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (7)
- ASYMMETRY:3.3>=1.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_BOOST:ANALYST:0.40
- EARNINGS_PROXIMITY:30d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- MOMENTUM:1.9<4.5
- DEATH_CROSS:HARD_BLOCK
Warning (0)
none
Reward-to-Risk
3.33
Upside
+23.4%
Downside
7.0%
Sizing output
AVOID
SetupFalling Knife — Death cross, below all MAs, RSI 38, MACD bearish
EdgeNo clear edge — No clear edge identified
SuitabilityAggressive — MCap $3.5B<$5B
Investment implication
The F-path SELL output reflects an overall score of 4.4 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Sentiment at 7.9) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( MOMENTUM:1.9<4.5, DEATH_CROSS:HARD_BLOCK) reinforce the read. Current asymmetry R:R is 3.33 — supplementary context, not the trigger for this path.
The strongest dimensions are Sentiment at 7.9, Technical at 7.1, and Insider at 6.7; the weakest are Momentum at 1.9, Growth at 2.2, and Risk (lower is worse) at 4.0. The V9 engine flagged 2 failed gates, producing an asymmetric reward-to-risk of 3.33 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Earnings Beat Streak
Trip ifEarnings miss exceeds negative 10% for 2 consecutive quarters.
- P2Analyst Upside 35pct
Trip ifAnalyst consensus price target falls below $200 (below current price of $221.68).
- P3Weak Free Cash Flow Quality
Trip ifFree cash flow conversion falls below 15% of net income for 2 consecutive quarters.
- P4High Short Interest 17pct
Trip ifShort interest rises above 20% of float.