Omnicell (OMCL): A Hidden Gem or a Mirage? Unveiling Its True Market Value
Omnicell Inc (NASDAQ:OMCL), a leading provider of automation and business analytics software for healthcare providers, experienced a daily loss of -4.45% on September 26, 2023, contributing to a three-month loss of -33.37%. Despite the recent losses and a reported Loss Per Share of 0.52, the question remains: is the stock significantly undervalued? This article aims to provide a comprehensive analysis of Omnicell's valuation, offering insights into the company's financial health and future prospects.
Company Overview
Omnicell Inc is a key player in the healthcare industry, providing automation and business analytics software to healthcare providers. The company primarily operates in the United States, offering products such as medication dispensing systems, pharmacy inventory management systems, and related software. Omnicell's medication adherence segment also provides products like consumable medication blister cards and packaging equipment to help administer medication outside of a hospital setting.
As of September 26, 2023, Omnicell's stock was priced at $46.34 per share, with a market cap of $2.10 billion. However, the GF Value, an estimation of the stock's fair value, stands at $144.61, suggesting that the stock may be significantly undervalued.
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded.
According to GuruFocus Value calculation, Omnicell (NASDAQ:OMCL) appears to be significantly undervalued. If the price of a stock is significantly above the GF Value Line, it is considered overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher. Given Omnicell's current price of $46.34 per share and the market cap of $2.10 billion, the 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.
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Financial Strength
Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid this, it's important to review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to understand its financial strength. Omnicell has a cash-to-debt ratio of 0.67, which ranks worse than 50.91% of 656 companies in the Healthcare Providers & Services industry. The overall financial strength of Omnicell is 5 out of 10, which indicates that the financial strength of Omnicell is fair.
Profitability and Growth
Investing in profitable companies poses less risk, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is typically a safer investment than one with low 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 Loss Per Share of $0.52. Its operating margin is -2.84%, which ranks worse than 65.36% of 661 companies in the Healthcare Providers & Services industry. Overall, GuruFocus ranks the profitability of Omnicell at 8 out of 10, which indicates strong profitability.
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Omnicell is10.6%, which ranks better than 55.5% of 573 companies in the Healthcare Providers & Services industry. The 3-year average EBITDA growth is -14%, which ranks worse than 80.27% of 522 companies in the Healthcare Providers & Services industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (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 is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Omnicell's ROIC was -1.75, while its WACC came in at 7.14.
Conclusion
In summary, the stock of Omnicell (NASDAQ:OMCL) appears to be significantly undervalued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks worse than 80.27% of 522 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 first appeared on GuruFocus.
