X-ray luggage and parcel examiner OSI Systems (OSIS -8.98%) stock tumbled 9.9% through 11:40 a.m. ET Friday morning after reporting mixed earnings on Thursday.
Heading into the company's Q4 report, analysts were looking for $3.77 per share in non-GAAP profit on sales of $529.7 million, as TheFly.com reports. Unfortunately, while OSI beat earnings with $3.78 per share in profit, its sales fell far short of expectations, coming in at just $484.1 million.
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OSI Systems Q4 earnings
That's the good news -- now here's the bad. OSI Systems' Q4 sales declined 4% year over year, and the $3.78 per share it earned were only non-GAAP profits; actual earnings calculated under generally accepted accounting principles (GAAP) were only $3.27 per share, and up only 8% year over year.
For the full year, OSI reported 4% sales growth to $1.8 billion, and only 3% GAAP earnings growth -- $8.95 per share.
NASDAQ: OSIS
Key Data Points
What's next for OSI Systems stock
At first glance, these aren't great numbers. OSI stock trades close to $200 per share right now, and its $8.95 per share in full-year earnings works out to a 22x price-to-earnings ratio -- a bit expensive for a company growing earnings at only 3%!
The good news is that free cash flow at OSI looks quite a bit better. In 2026, FCF totaled $245.3 million, resulting in a price-to-free cash flow ratio of just 13.3x. The better news is that in 2027, management forecasts accelerated growth, with sales expected to rise as much as 8% and non-GAAP earnings as much as 11%.
That's still not fast enough growth to justify the valuation in my view, but it's closer to the mark. If OSI stock continues to sink in the wake of earnings, it may become cheap enough to buy.
