OSI Systems, Inc. (OSIS) DCF Valuation & Fundamental Primer
OSI Systems, Inc. (OSIS) currently trades at $271.38 with an enterprise value of $4.20B. Our proprietary institutional model rates OSI Systems, Inc. at 86/100 (Grade: A · High-Quality Compounder). The current market price prices in an implied 5-year revenue CAGR of 20.0% vs. historical growth of 19.3% (Fairly Priced to Fundamentals).
Institutional fundamental teardown of OSI Systems, Inc. (OSIS) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
OSI Systems, Inc. (OSIS) 3-Scenario DCF Valuation Range
Stress-test OSIS's 5-year growth, target FCF margin, WACC, terminal methodology, and SBC/dilution friction in real time.
Split between 5-Year Explicit Cash Flows and Discounted Terminal Value
2D Institutional Valuation Sensitivity Heatmap
Implied share price & upside/downside spread across 25 valuation states (Current Price: $271.38).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $293.15 +8% | $310.93 +15% | $331.67 +22% | $356.18 +31% | $385.60 +42% |
| 9.3% | $264.26 -3% | $278.27 +3% | $294.35 +8% | $313.00 +15% | $334.90 +23% |
| 10.0% | $240.52 -11% | $251.78 -7% | $264.55 -3% | $279.13 +3% | $295.96 +9% |
| 10.8% | $220.68 -19% | $229.88 -15% | $240.21 -11% | $251.86 -7% | $265.12 -2% |
| 11.5% | $203.85 -25% | $211.48 -22% | $219.97 -19% | $229.45 -15% | $240.11 -12% |
Institutional Software Quality Scorecard (86/100 · Grade A)
Strong fundamentals, above-average cash generation, and robust competitive positioning.
Elite deferred revenue float; FCF exceeds operating income by >20%
Standard software SBC dilution; modest equity transfer to employees
High-quality software margins with healthy balanced growth and profitability
Zero-debt fortress balance sheet with abundant net cash liquidity
Core Investment Strengths & Moats
- High-grade cash conversion: FCF is 309% of EBIT driven by upfront annual collections
- Healthy unit economics: 72.7% gross margin
- Fortress capital structure: Zero debt and $247.0M in pure net cash
Key Operational & Dilution Risks
Reverse-DCF Solver: What Growth is Priced Into OSIS?
Market implies 20.0% annual revenue growth over next 5 years (31.4% dilution-adjusted), in line with company run-rate.
Headline Reverse-DCF ignores Stock-Based Compensation (14.0% of revenue) and annual share dilution (1.8%/yr). Accounting for both requires 31.4% 5-year revenue CAGR to justify $271.38/sh on a true per-share economic cash flow basis.
OSI Systems, Inc. (OSIS) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $616.1M | $616.1M | $734.9M | $876.8M | $1.05B | $1.25B | $1.49B |
| Gross Profit | $447.9M | $447.9M | $534.3M | $637.4M | $760.5M | $907.2M | $1.08B |
| Operating Income (EBIT) | $50.5M | $50.5M | $60.3M | $71.9M | $85.8M | $102.3M | $122.1M |
| Stock-Based Compensation (SBC) | $86.2M | $86.2M | $102.9M | $122.8M | $146.4M | $174.7M | $208.4M |
| Unlevered Free Cash Flow (FCF) | $155.9M | $155.9M | $185.9M | $221.8M | $264.6M | $315.7M | $376.7M |
| SBC-Adjusted True Cash Flow | $69.6M | $69.6M | $83.0M | $99.1M | $118.2M | $141.0M | $168.2M |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -29.2 + 0.80 × (Rule of 40) · R² = 81%Stocks below the gold regression line trade at a discount relative to their Rule of 40 compounding efficiency.
| Company | Ticker | Market Cap | TTM Revenue | Gross Margin | FCF Margin | Rule of 40 | SBC % Rev | EV / Rev |
|---|---|---|---|---|---|---|---|---|
| OSI Systems, Inc. | OSIS | $4.56B | $616.1M | 72.7% | 25.3% | 44.6% | 14.0% | 7.0× |
| ServiceNow | NOW | $152.61B | $10.98B | 79.2% | 31.1% | 54.2% | 15.9% | 13.9× |
| Workday, Inc. | WDAY | $50.35B | $8.00B | 75.0% | 27.4% | 43.9% | 19.0% | 6.4× |
| Salesforce | CRM | $217.10B | $37.90B | 77.2% | 32.8% | 42.8% | 8.4% | 5.8× |
| Datadog | DDOG | $46.05B | $2.68B | 80.8% | 31.1% | 57.7% | 21.3% | 17.4× |
| Snowflake Inc. | SNOW | $71.79B | $3.63B | 66.5% | 25.2% | 57.7% | 40.8% | 20.0× |
| Hubspot | HUBS | $19.89B | $2.63B | 85.0% | 21.3% | 52.7% | 19.2% | 7.7× |
| Peer Cohort Median Benchmark (N=6) | 78.2% | 29.2% | 53.5% | 19.1% | 10.8× | |||
EV / Revenue Multiple Compression Stress Test
| Multiple Scenario | EV / Revenue | Implied Enterprise Value | Implied Equity Value | Implied Share Price | Delta vs Current |
|---|---|---|---|---|---|
| Current Multiple | 7.0× | $4.31B | $4.56B | $271.38 | 0.0% |
| -20% Multiple Compression | 5.6× | $3.45B | $3.70B | $220.05 | -20.0% |
| -35% Multiple Compression | 4.5× | $2.80B | $3.05B | $181.54 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $3.08B | $3.33B | $198.07 | -28.6% |
Frequently Asked Questions: OSI Systems, Inc. (OSIS) Valuation
What is OSI Systems, Inc. (OSIS)'s intrinsic DCF valuation and implied share price?
Based on audited SEC 10-K/10-Q filings and a 5-year 3-statement discounted cash flow (DCF) model, OSI Systems, Inc. (OSIS) has a Base Case implied value of $264.55 per share (with a Bear Case of $124.10 and a Bull Case of $457.81), compared to its current price of $271.38. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is OSI Systems, Inc. (OSIS)'s Rule of 40 score and Free Cash Flow margin?
OSI Systems, Inc. achieves a Rule of 40 score of 44.6%, combining a 19.3% revenue growth run-rate with a 25.3% TTM free cash flow margin on $616.1M in trailing twelve-month revenue. In the Software & Cloud Services peer cohort, the median Rule of 40 benchmark is 53.5%.
What revenue growth rate is priced into OSIS stock according to Reverse-DCF analysis?
At $271.38 per share (Enterprise Value of $4.31B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 20.0%, compared to OSI Systems, Inc.'s historical CAGR of 19.3%. Overall market expectations are rated as "Fairly Priced to Fundamentals".
How does OSI Systems, Inc. compare to Software & Cloud Services software peers?
OSI Systems, Inc. (OSIS) earns an institutional Software Quality Score of 86/100 (Grade A — High-Quality Compounder). Across its Software & Cloud Services peer group (NOW, WDAY, CRM, DDOG, SNOW), the cohort trades at a median EV/TTM Revenue multiple of 10.8× and a median gross margin of 78.2%.
How does Stock-Based Compensation (SBC) impact OSI Systems, Inc. (OSIS)'s valuation?
OSI Systems, Inc. recorded $86.2M in TTM stock-based compensation (14.0% of revenue). When treating SBC as a cash-equivalent compensation expense, OSI Systems, Inc.'s SBC-adjusted free cash flow yield is 1.5%, scoring 16/25 on our Shareholder Dilution Friction pillar.