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OSI Systems (OSIS): analysis traps
Where its figures could mislead a reader, and what to check before taking them at face value · Data: Q1 FY27, to Sep 30, 2026, filed Oct 29, 2026; rules v1.1
OSI Systems (OSIS): 1 rule of 10 triggered on the filings to Sep 30, 2026: FCF growth = the business improved. 2 to review; 1 with insufficient data; 2 not applicable. Each is a question to verify, with the normal explanation that would produce the same figures.
Check these first
FCF growth = the business improved Triggered · severity high · confidence medium
Free cash flow rose $172M (+233%), from $74M to $245M, but working capital released $206M more cash than the year before: more than the whole increase came from sources that need not repeat. Operating cash flow before working capital fell by $28M.
Innocent reading: An expansion programme finished, so capex fell back to maintenance levels for good.
Low P/E at a cyclical peak = undervalued To review · confidence medium
Net income of $159M is at a high against a median of $115M over eight years; at 20.1× the market is not pricing it as cheap, but a multiple on this year's profit still understates the mid-cycle one (27.7×).
A precise DCF value = the true value To review · confidence high
The DCF's point value is 94.56 a share (price 196.36); 66% of it is the terminal value, a number about years no one has seen. Moving operating margin by ±3 pts alone takes it from 60.99 to 128.14; across every method the research ran the range is -28 to 1,446. The value is a range; the decimals are not information.
Innocent reading: A stable, mature business with a narrow range of outcomes, where the point value is a fair summary.
Every rule
A01 FCF growth = the business improved Triggered severity high · confidence medium
Free cash flow rose $172M (+233%), from $74M to $245M, but working capital released $206M more cash than the year before: more than the whole increase came from sources that need not repeat. Operating cash flow before working capital fell by $28M.
The figures and how they are read
| Fiscal year before | FY25 |
| Fiscal year | FY26 |
| Operating cash flow, year before | $98M |
| Operating cash flow | $276M |
| Capex, year before | $24M |
| Capex | $31M |
| Free cash flow, year before | $74M |
| Free cash flow | $245M |
| Change in FCF | $172M |
| Change in capex | $7M |
| Working capital: change in its cash contribution | $206M |
| Of which: capex cut | 0.00 |
| Of which: working capital released | $206M |
| Share of the increase that need not repeat | +120.1% |
| Operating cash flow before working capital: change | -27795000.00 |
FCF = operating cash flow − cash capex; ΔFCF = ΔOCF − ΔCapEx; the working-capital part is the change in the cash-bridge items (receivables, inventory, payables, accruals), with the sign of the cash flow statement
Source: FY26 (cash flow statement, fiscal year) · FY25 (cash flow statement, fiscal year before)
What would explain it innocently
- An expansion programme finished, so capex fell back to maintenance levels for good
- Suppliers agreed longer payment terms in a contract
- Inventory was brought down after a glut and will stay down
What to look for in the filing
- Maintenance capex (what it costs to keep the assets working)
- Supplier payment terms and any supply-chain financing
- Management's capex guidance for next year
What would show the trap does not apply
- Next year's FCF holds or rises with capex back at its earlier level and working capital no longer releasing cash
- The 10-K's capex guidance and the segment capex show the cut is a completed programme, not deferral
- The working-capital release matches a disclosed change in terms or a divestiture, not stretched payables or a collection push
Look again: next filing.
A07 Stock compensation added back = no economic cost Not triggered confidence high
Stock compensation is 1.5% of revenue: small enough that adding it back changes little.
The figures and how they are read
| Fiscal year | FY26 |
| Stock compensation | $26M |
| Revenue | $1.8B |
| SBC / revenue | +1.5% |
| Buybacks | $272M |
| Buybacks / SBC | 10.3 |
| Diluted shares, year before | 17.2M shares |
| Diluted shares | 17.3M shares |
| Diluted shares: change | +0.6% |
SBC / revenue from the cash flow statement's add-back; the diluted weighted share count year over year; buybacks from the financing section
Source: FY26 (stock compensation, buybacks and the diluted share count, fiscal year)
B02 Receivables growing = future cash is certain Not triggered confidence medium
Receivables grew -10% against revenue 5% in Q1 FY27; DSO 172 against a median of 154: collections are keeping pace with sales.
The figures and how they are read
| Quarter | Q1 FY27 |
| Revenue, year over year | +4.9% |
| Receivables, year over year | -9.8% |
| Quarter before | Q4 FY26 |
| Revenue y/y, quarter before | -4.1% |
| Receivables y/y, quarter before | -8.7% |
| Days sales outstanding | 172.3 |
| DSO, median of eight quarters | 153.7 |
| Receivables | $747M |
| Revenue | $403M |
receivables and revenue against the same quarter a year earlier; DSO = receivables / quarterly revenue × days, against the median of the eight quarters before
Source: Q1 FY27 (receivables and revenue) · Q1 FY26 (the same quarter a year earlier)
B08 Adjusted profit = economic profit Insufficient data
no reconciliation table read from the releases yet and fewer than three quarters with both an adjusted and a GAAP EPS
C02 Low net debt = no refinancing risk Not triggered confidence medium
$3M comes due within a year, 223.9× covered by cash and investments of $302M plus $265M of free cash flow.
The figures and how they are read
| Cash and investments | $302M |
| Debt | $1000M |
| Net debt | $698M |
| Due within a year | $3M |
| Read from | the debt maturity table |
| Free cash flow, twelve months | $265M |
| Cash plus free cash flow | $567M |
| Coverage of what is due | 223.9 |
| Due in the second year | $5M |
| Balance sheet date | 2026-09-30 |
due within a year from the maturity table (else the current portion of debt), against cash and investments plus free cash flow over the last twelve months (zero if negative); no credit lines assumed
Source: FY26 (debt maturities, cash and investments)
D03 EPS growth = profit growth Not triggered confidence high
EPS rose 29% and net income rose 20% in Q1 FY27; the share count fell 7.0%: EPS growth follows profit growth.
The figures and how they are read
| Quarter | Q1 FY27 |
| Quarter before | Q1 FY26 |
| EPS, year before | $1.18 |
| EPS | $1.51 |
| Net income, year before | $21M |
| Net income | $25M |
| Diluted shares, year before | 17.5M shares |
| Diluted shares | 16.3M shares |
| EPS growth | +28.6% |
| Net income growth | +19.5% |
| Diluted shares: change | -7.0% |
| eps from profit | $0.23 |
| eps from share count | $0.11 |
EPS and net income against the same quarter a year earlier; the EPS bridge attributes the change to profit first, then to the share count (the order is fixed and disclosed)
Source: Q1 FY27 (net income, diluted shares, EPS) · Q1 FY26 (the same quarter a year earlier)
E02 Low P/E at a cyclical peak = undervalued To review confidence medium
Net income of $159M is at a high against a median of $115M over eight years; at 20.1× the market is not pricing it as cheap, but a multiple on this year's profit still understates the mid-cycle one (27.7×).
The figures and how they are read
| market value | $3.2B |
| net income ttm | $159M |
| pe ttm | 20.10 |
| net income median fy | $115M |
| pe mid cycle | 27.70 |
| net income peak fy | $155M |
| years | FY19 / 65.0; FY20 / 75.0; FY21 / 74.0; FY22 / 115.0; FY23 / 92.0; FY24 / 128.0; FY25 / 150.0; FY26 / 155.0 |
| down years in window | 2 |
P/E on the trailing twelve months' net income against the P/E on the median net income of the last eight fiscal years (a mid-cycle stand-in); 'at a peak' = this year's profit at or above 90% of the best year and at least 1.3× the median
Source: Q1 FY27 (net income, trailing twelve months)
What would show the trap does not apply
- Profit holds at this level through the next two years (the eight-year peak was a new base, not a top)
- The industry's capacity and prices stay where they are rather than reverting
Look again: next filing.
E07 A precise DCF value = the true value To review confidence high
The DCF's point value is 94.56 a share (price 196.36); 66% of it is the terminal value, a number about years no one has seen. Moving operating margin by ±3 pts alone takes it from 60.99 to 128.14; across every method the research ran the range is -28 to 1,446. The value is a range; the decimals are not information.
The figures and how they are read
| dcf value | 94.56 |
| price | 196.36 |
| terminal value share | +66.2% |
| swing by input | Operating margin / ±3 pts / 60.99 / 128.14; Revenue growth (each year) / ±5 pts / 70.37 / 123.49; WACC / ±1 pt / 78.43 / 116.01; Tax rate / ±5 pts / 86.1 / 103.03 |
| range all methods | -28.2; 1446.4 |
the DCF's point value against the share of it that is the terminal value and the value at each input moved by one step (growth ±5 pts, WACC ±1 pt, margin ±3 pts …); the range across every method the research ran
Source: 2026-11-08 (valuation research)
What would explain it innocently
- A stable, mature business with a narrow range of outcomes, where the point value is a fair summary
- The inputs that matter most are themselves well known (a regulated return, a long contract)
What to look for in the filing
- Which input you believe differs from the research's and why
- What the price implies for growth (the reverse DCF on the fair-value page)
What would show the trap does not apply
- The DCF's value is robust to the terminal growth and discount rate (the range's low end is still above the price)
- The company's cash flows over the next three years track the DCF's early years
Look again: next filing.
J06 A bank's low P/E and high profit = safe Not applicable
not a bank
J08 A REIT's low net income = the dividend is unsafe Not applicable
not a REIT
What the statuses mean
Triggered: the filings show the pattern; read the normal explanations and the missing evidence before concluding anything. To review: one quarter or a weak signal; a reader's judgement, not a pattern. Not triggered: the pattern is absent on these figures. Insufficient data: the filings read so far do not hold what the rule needs; this is not a clean bill. Not applicable: the rule is not meant for this kind of company (a bank's working capital, a loss-making quarter's EPS growth). Out of date: the latest filing is more than fifteen months old.
Severity is what the pattern could mean for cash, value or solvency; confidence is how reliable the inputs and the reading are. The two are kept apart.
Record a view
A reader's judgement, grounds, what would change it and the next review; kept in the browser (needs JavaScript).
Every rule and the companies it triggers on → OSI Systems: cash flow →
Each rule reads the company's own filings by a fixed formula and says what would explain the same figures innocently. A triggered rule is a question to verify, not a finding of manipulation, and not a view on the stock. Missing data is shown as missing, never as clear. Not investment advice.