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Omnicell - No Stand-Out Features

No Compelling Hypothesis

This analysis was created on December 29, 2018 using closing prices from December 28, 2018 with the goal to determine if there is a viable investment strategy in Omnicell (OMCL).

It will be a peer based analysis, evaluating OMCL relative to companies in the same sector and industry and having a market cap within 65% of OMCL and over $950M.  When you subscribe to INVRS you can customize the peer group any way you wish. 

Why peer based? It gives the numbers context, you can benchmark and you might find another opportunity.  It provides you with another vital dimension upon which to evaluate your target company.  Once you've established your peer group, you can do analysis on the group as easily as you analyze a single stock. 

OMCL and its peer group will be analyzed on six factors:
  • Price momentum,
  • Quality,
  • Growth,
  • Income,
  • Value,
  • Profitability.
Each factor calculates several metrics each providing different insight.  For example the profitability factor looks at gross profit to assets, net profit margin, the five-year average pre-tax return on assets, the three year return on equity, net operating income margin and the free cash flow yield.

Each metric is ranked from highest to lowest with the best performing stock earning the highest score.  The scores for each metric are summed and re-ranked.  The stock with the highest ranking is the best performing company for that particular factor.

Overview:

Omnicell, Inc. engages in the provision of automation and business analytics software solutions for patient-centric medication and supply management. It operates through Automation and Analytics, and Medication Adherence segments. The Automation and Analytics segment designs, manufactures, and sells medication and supply dispensing systems, pharmacy inventory management systems, and related software. The Medication Adherence segment includes consumable medication blister cards, packaging equipment, medication synchronization platform, and ancillary products and services. The company was founded by Randall A. Lipps in September 1992 and is headquartered in Mountain View, CA.
Founded: 1992
Number of Employees: 2350
Headquarters: Mountain View US
CEO: Randall A. Lipps

Peer Group:

Stock Name (Symbol)Last PriceMarket Cap
HMS Holdings Corp.(HMSY:XNAS)$28.232.3692B
National Research Corporation Class A (NRCIA:XNAS)$38.67957.55447M
Allscripts Healthcare Solutions, Inc.(MDRX:XNAS)$9.461.6527B
Stericycle, Inc.(SRCL:XNAS)$36.603.3160B
Syneos Health Inc, Class A (SYNH:XNAS)$38.243.9473B
Healthcare Services Group, Inc.(HCSG:XNAS)$39.462.9117B
CompuGroup Medical SE Unsponsored ADR(CMPUY:OOTC)$29.401.4569B
Omnicell, Inc.(OMCL:XNAS)$60.482.3959B

Market and Sector Price Momentum Analysis

Let's start by getting a visual perspective on how the market and sector have been performing.

It's been quite a volatile year, coming off a couple years of pleasant growth. 

Let's look next at market and sector momentum.


Longer Term -
% Price Change over Two Years
Medium Term -
12 Month Less 1 Month Price Change
Short Term -
Price Less 3 Month Moving Average
Market - S&P 50011.03% (bullish)3.2% (weakly bullish)-11.07% (bearish)
Sector - S&P Health Care Select Sector23.91% (strongly bullish)14.69% (bullish)-8.14% (bearish)

It looks like both the market and the sector are at an inflection point with momentum possibly changing from positive to negative.  We'll keep this trend in mind as we evaluate the opportunity,

Price Momentum

Let's look at the price momentum for the group.  We're using the following three metrics that reflect a long, medium and short-term perspective:
  1. Percentage price change over two years,
  2. 12 month less one month price change,
  3. Price less 3 month moving average change.


Long Term -
% Price Change over Two Years
/Rank
Medium Term -
12 Month Less 1 Month Price Change
/ Rank
Short Term -
Price Less 3 Month Moving Average
/ Rank
SumFinal Rank
HMSY55%/6111%/8-14%/3176
NRCIA104%/87%/51%/8218
MDRX-7%/3-30%/1-9%/592
SRCL-52%/1-29%/2-18%/141
SYNH-27%/219%/6-17%/2103
HCSG1%/5-10%/3-8%/6144
CMPUY0%/40%/40%/7155
OMCL78%/759%/7-12%/4187

NRCIA had the best price momentum, OMCL has the second best score, but it is demonstrating a pattern similar to what we saw in the market and sector with a possible change in momentum turning from positive to negative.

Quality

There are five metrics for quality:
  1.   Earnings volatility (measured as the standard deviation of six years of earnings),
  2.   Gross margin (gross profit divided by sales),
  3.   Net margin (net profit divided by sales)
  4.   Total asset turnover (sales divided by total assets),
  5.   Financial leverage (debt as a percentage of total capital)


SD of Earnings
/ Rank
GM
/ Rank
NM
/ Rank
Asset Turnover
/ Rank
Financial
Leverage
/ Rank
Sum
/ Final
Rank
HMSY14%/830%/38%/753%/428%/628/7
NRCIA21%/754%/819%/892%/71%/838/8
MDRX44%/341%/6-9%/143%/250%/315/2
SRCL116%/241%/51%/351%/349%/417/3
SYNH131%/117%/2-1%/237%/150%/28/1
HCSG28%/414%/15%/5273%/88%/725/5
CMPUY21%/635%/45%/665%/561%/122/4
OMCL27%/545%/73%/473%/629%/527/6

NRCIA got the highest score for quality and OMCL came in third.

Growth

There are five metrics for the factor growth:
  1. Total revenue change over 1 year
  2. EBITDA change over 1 year
  3. Free cash flow change over 1 year
  4. Gross margin change over 1 year
  5. Number of year over year growth in earnings.


Revenue d
Over 1 Year 
/ Rank
EBITDA d
Over 1 Year
/ Rank
FCF d
Over 1 Year
/ Rank
GM d
Over 1 Year
/ Rank
Number of
Years Growth
/ Rank
(max score 6)
Sum
/ Final
Rank
HMSY6%/3-2%/3-8%/4-0%/64/723/5
NRCIA7%/510%/63%/6             -0%/7*3/630/7
MDRX17%/610%/7-0%/5-1%/52/528/6
SRCL1%/1-65%/1-11%/3-1%/43/615/3
SYNH66%/846%/898%/8-23%/1*3/631/8
HCSG19%/78%/5-94%/1-4%/25/823/5
CMPUY7%/42%/456%/74%/84/730/7
OMCL3%/2-21%/2-74%/2-1%/3 5/817/4

OMCL got the second to worst score.  SYNH got the best.

Income

Most of these companies including OMCL don't offer dividends so we won't be looking at this factor.

Value

We'll look at five value factors:
  1. Enterprise value over EBITDA
  2. Price to book
  3. Price to earnings
  4. Price to sales
  5. Price to theoretical price (as calculated using the Ohlson Clean Surplus (OCS), for more information on the valuation tool, please review this article).
Here are the results:


EV/EBITDA
/ Rank
P/B
/ Rank
P/E
/ Rank
P/S
/ Rank
P/TP
/ Rank
Sum
/ Final
Rank
HMSY15/8.04/560/42.8/34/424/6
NRCIA41/1.3/173/314/18/28/2
MDRX17/6.02/6na**/01.5/710/120/4
SRCL35/3.011/8513/11.6/62/826/7
SYNH16/7.014/7na**/01.2/83.1/628/8
HCSG29/4.07/233/62.1/53.3/522/5
CMPUY27/5.05/341/54.9/22.8/722/5
OMCL36/2.04/4114/22.6/46/315/3

OMCL is the second most expensive.

Profitability

There are six profitability factors:
  1. Gross profits to assets
  2. Net profit margin
  3. 5 year average pretax return on assets
  4. 3 year average ROE
  5. Net operating income margin
  6. Free cash flow yield
 Here are the results:


GP/Assets
/ Rank
NPM
/ Rank
5 yr avg
Pretax ROA
/ Rank
3 yr avg
ROE
/ Rank
Net
OIM
/ Rank
FCF
Yield
/ Rank
Sum
/ Final
Rank
HMSY16%/28%/75%/46%/410%/63%/427/5
NRCIA50%/819%/824%/825%/829%/80%/242/8
MDRX18%/3-9%/1-3%/1-6%/12%/314%/817/1
SRCL21%/41%/36%/55%/30%/111%/723/4
SYNH6%/1-5%/23%/224%/76%/45%/622/3
HCSG38%75%/517%/723%/67%/5-2%/131/6
CMPUY23%/55%/67%/619%/514%/74%/534/7
OMCL33%/63%/45%/34%/21%/20%/320/2

OMCL is the second least profitable, NRCIA is the most profitable.

Summary

OMCL is not demonstrating strength in any of the factors.  It came in third in quality and was second from the bottom in growth, value and profitability.  Its best showing was in price momentum in the number two position, but that number needs to be looked at in context.  In all levels of analysis - market, sector and security - it looks like momentum is changing from positive to negative.

Given these results, there is no investment hypothesis for OMCL at this time.

Disclaimer

Part of intelligent investing involves taking on risk levels appropriate to one's circumstances.  We don't know what yours are and this analysis should not be construed as investment advice.  INVRS, its parent company, its officers, directors and employees cannot be held responsible for any investment decisions you make.

Analysis Notes

* SYNH and NRCIA only had five years of EPS data.
**Negative number


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