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On Friday, JPMorgan initiated coverage on shares of OSI Systems (NASDAQ:OSIS), a company known for its security scanning products, with a Neutral stock rating and a price target of $225. The new price target suggests a modest 5% potential upside from the current level. The company, currently valued at $3.61 billion, has demonstrated strong financial health, earning a "GOOD" overall score according to InvestingPro metrics.
In their coverage initiation, JPMorgan analysts highlighted the company’s prospects for growth, margin expansion, and cash generation. They identified OSI Systems’ Security business as the primary driver of earnings going forward. The Security division’s scanning products are expected to play a significant role in the company’s financial performance, building on the company’s impressive 20.69% revenue growth over the last twelve months.
The analysts pointed out that OSI Systems’ stock has already seen substantial growth, having risen 28% year-to-date, compared to the S&P 500’s increase of 4%. They noted that the company’s valuation is considerably higher than its historical average, which has led them to adopt a cautious stance.
JPMorgan set their price target based on a multiple of 21 times their adjusted earnings per share (EPS) estimate of $10.80 for the calendar year 2026. This approach underscores the analysts’ expectations for OSI Systems’ continued earnings growth over the next few years.
Despite the optimistic view on OSI Systems’ business trajectory, JPMorgan’s neutral stance reflects a wait-and-see approach due to the stock’s significant run-up and the company’s current valuation relative to its historical levels.
In other recent news, OSI Systems reported strong financial results for the second quarter of fiscal year 2025. The company achieved a record non-GAAP adjusted earnings per share of $2.42, surpassing the forecasted $2.33. Revenues increased by 12% year-over-year, reaching $420 million, although they fell short of the projected $402 million. Following these results, OSI Systems raised its FY2025 revenue guidance to between $1.685 billion and $1.710 billion and increased its non-GAAP EPS guidance to $9.10-$9.40. Additionally, Oppenheimer upgraded its price target for OSI Systems to $225, maintaining an Outperform rating, citing a positive outlook driven by a record backlog and improved cash flow. The company has been making significant strides in its security division, with notable project deployments in Mexico contributing to its growth. OSI Systems is also expanding its presence in the aviation market with recent contract wins, further enhancing its growth prospects. These developments reflect OSI Systems’ strategic focus on high-demand sectors and its ability to capitalize on market opportunities.
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