Since March 2021, the S&P 500 has delivered a total return of 71.8%. But one standout stock has more than doubled the market - over the past five years, OSI Systems has surged 185% to $278.95 per share. Its momentum hasn’t stopped as it’s also gained 18.8% in the last six months thanks to its solid quarterly results, beating the S&P by 15.8%.

Is it too late to buy OSIS? Find out in our full research report, it’s free.

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

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, OSI Systems’s sales grew at an impressive 10.3% compounded annual growth rate over the last five years. Its growth surpassed the average business services company and shows its offerings resonate with customers.

2. Outstanding Long-Term EPS Growth

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

OSI Systems’s EPS grew at 14.9% compounded annual growth rate over the last five years, higher than its 10.3% 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

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

As you can see below, OSI Systems’s margin expanded by 4.5 percentage points over the last five years. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. OSI Systems’s free cash flow margin for the trailing 12 months was 7.6%.

Final Judgment

These are just a few reasons why OSI Systems is one of the best business services companies out there, and with its shares outperforming the market lately, the stock trades at 25.4× forward P/E (or $278.95 per share). Is now a good time to initiate a position? See for yourself in our full research report, it’s free.

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