OSI Systems, Inc. (NASDAQ:OSIS)

CAPS Rating: 3 out of 5

The Company is engaged in the design and manufacture of electronic systems and components for critical applications. It operates in three divisions: Security, Healthcare, and Optoelectronics and Manufacturing.

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Player Avatar ScalaAnalyst (21.88) Submitted: 1/25/2013 5:38:51 PM : Outperform Start Price: $54.92 OSIS Score: +1.79

I know, one shouldn't try to "time" the market, but I'm always on the look out for a stock that has "fallen from grace" because of the some event that no one was able to see. Well this stock was certainly blind sided in the media and so, this stock popped up on my radar. My argument is that, if you were considering this stock before January 23 at 70/sh then this is probably a great stock, as it is priced at 60/sh. The price has fallen from nearly 80/sh a current price of 57.33/sh. I can see why investors would want to dump this stock. The TSA announced that the scanners that show everyone as nude will be removed from major airports. So, we passed this idea between everyone in the office trying to figure where these scanners could be used in the future. After all the bad jokes settled and we took a serious look at the current news, it appears these should be used in international airports, perhaps scanning cargo as it comes into the US for drugs or perhaps at the entrance for visitors at our public schools. Although it will be hard to press these into schools, I believe they could be used in places where potential terrorists or their cargo needs to be screened. But, I am digressing to a political comment. There are plenty of boards out there for that.

Looking at the company: They only have 8% insider ownership, which isn't that great, but hopefully, at least someone there will be looking out for their interests. The PE is still kind of high at 26, with ttm earnings of 2.30. But their sales growth and earnings growth appear to be in line.

Their debt/Equity Ratio is quite low at 0.06, and their last five quarters have provided earning surprises that are all positive. I'm an earnings kind of guy, so comparing the earnings for this company against their industry, the company has done quite well. The earnings growth for the next quarters should be better than last years and the annual growth should also be better. The earnings for the last 5 quarters have been at or exceeding the street estimates so that appears in line. So I believe once the smoke has cleared, this company will return to a peg ratio that is closer or exceeds 1 in the next two to four years.

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