Omnicell Inc (OMCL, Financial) has seen a significant decline in its stock price, with a daily loss of 16.44% and a 3-month loss of 52.11%. With an Earnings Per Share (EPS) loss of 0.52, investors might be wondering: Is the stock significantly undervalued? This article aims to answer that question by delving into a valuation analysis of Omnicell. Read on to gain insights into the intrinsic value of this stock.
Company Overview
Omnicell Inc is a leading provider of automation and business analytics software for healthcare providers. The company's portfolio includes medication dispensing systems, pharmacy inventory management systems, and related software. The majority of its revenue is generated in the United States. With a market cap of $1.40 billion and sales of $1.20 billion, the company's stock price stands at $29.89, while the GF Value, an estimation of fair value, is at $151.27.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical multiples, a GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of business performance. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded.
Omnicell (OMCL, Financial) appears to be significantly undervalued based on GuruFocus's valuation method. The GF Value Line indicates that if the stock price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. Conversely, if the stock price is significantly below the GF Value Line, the stock may be undervalued and have higher future returns. At its current price of $29.89 per share, Omnicell stock appears to be significantly undervalued.
Because Omnicell is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth.
Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss to investors. To avoid this, investors must review a company's financial strength before deciding to purchase shares. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. Omnicell has a cash-to-debt ratio of 0.67, which ranks worse than 51.45% of 655 companies in the Healthcare Providers & Services industry. The overall financial strength of Omnicell is 5 out of 10, indicating fair financial strength.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Omnicell has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $1.20 billion and a Loss Per Share of $0.52. Its operating margin is -2.84%, which ranks worse than 65.81% of 658 companies in the Healthcare Providers & Services industry. Overall, the profitability of Omnicell is ranked 8 out of 10, indicating strong profitability.
Growth is probably the most important factor in the valuation of a company. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Omnicell is 10.6%, which ranks better than 54.79% of 564 companies in the Healthcare Providers & Services industry. The 3-year average EBITDA growth rate is -14%, which ranks worse than 80.51% of 513 companies in the Healthcare Providers & Services industry.
ROIC vs WACC
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, Omnicell's ROIC was -1.75 while its WACC came in at 6.72.
Conclusion
In conclusion, the stock of Omnicell (OMCL, Financial) appears to be significantly undervalued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks worse than 80.51% of 513 companies in the Healthcare Providers & Services industry. To learn more about Omnicell stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
