Today, we take a deep dive into Owens & Minor Inc (OMI, Financial), a company that has been making headlines with a daily gain of 22.18% and a Loss Per Share of 1.3. However, over the past three months, the company has recorded a loss of 2.5%. This raises the question: is the stock significantly undervalued? In this article, we will analyze the company's valuation, financial strength, profitability, and growth prospects. Let's get started.
Company Overview
Owens & Minor Inc is a renowned distributor of consumable medical supplies. The company operates under two segments: Products & Healthcare Services and Patient Direct. The Products & Healthcare Services segment comprises the United States distribution business (Medical Distribution), outsourced logistics and value-added services business, and Global Products business. The Patient Direct segment includes home healthcare businesses (Byram and Apria). With a market cap of $1.50 billion and sales of $10.10 billion, the company seems to be making significant strides in the medical distribution industry. However, its stock price of $18.95 is significantly lower than the GF Value of $31.73, indicating potential undervaluation.
Understanding the GF Value
The GF Value is a proprietary measure that represents the intrinsic value of a stock. It's calculated based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. This value serves as a benchmark for the fair trading value of a stock. If the stock price is significantly above the GF Value Line, it's likely overvalued, predicting poor future returns. Conversely, if the price is significantly below the GF Value Line, the stock is likely undervalued, suggesting higher future returns.
Owens & Minor's stock is currently believed to be significantly undervalued, according to the GF Value. This suggests that the long-term return of its stock is likely to be much higher than its business growth.
These companies may deliver higher future returns at reduced risk.
Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent capital loss. Therefore, it's crucial to review a company's financial strength before investing. Owens & Minor's cash-to-debt ratio stands at 0.11, which ranks worse than 80.46% of companies in the Medical Distribution industry. This indicates fair financial strength, with an overall GuruFocus financial strength rank of 5 out of 10.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. Owens & Minor has been profitable 8 out of the past 10 years, with an operating margin of 1.29%, ranking worse than 70.33% of companies in the Medical Distribution industry. The company's profitability is ranked 6 out of 10, indicating fair profitability.
When it comes to growth, Owens & Minor's 3-year average annual revenue growth is -4.9%, ranking worse than 83.13% of companies in the same industry. However, its 3-year average EBITDA growth rate is 16.3%, ranking better than 61.43% of companies in the industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) is another way to evaluate its profitability. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Owens & Minor's ROIC was 2.25, while its WACC came in at 5.62.
Conclusion
Based on our analysis, Owens & Minor's stock appears to be significantly undervalued. The company shows fair financial strength and profitability, and its growth ranks better than 61.43% of companies in the Medical Distribution industry. For more information about Owens & Minor stock, you can check out its 30-Year Financials here.
For a list of high-quality companies that may deliver above-average returns, check out the GuruFocus High Quality Low Capex Screener.
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.
