OSI Systems combines a $1.9 billion backlog, regulatory security moat, recurring concessions, and recovering margins into a constructive long-term compounding opportunity despite near-term delivery volatility.
Overview
OSI Systems designs and operates specialized electronic systems for security, healthcare, and industrial markets, with revenue split between lumpy capital equipment and increasingly recurring maintenance, service, and turnkey concession income. Its Security division, led by Rapiscan, AS&E, and S2 Global, benefits from TSA, ECAC, and STAC certifications, proprietary scan analytics, and long customer relationships. **The $1.9 billion backlog and 1.3x book-to-bill provide substantial multi-year visibility**, although Q4 FY2026 revenue fell 4.1% to $484.06 million and missed the $528.34 million consensus because Middle East disruptions delayed shipments. Profitability remained strong: Q4 non-GAAP EPS rose 16.7% to a record $3.78, FY2026 non-GAAP EPS rose 10.6% to $10.35, adjusted operating margin reached 14.2%, and operating cash flow was a record $275.9 million. Management guides FY2027 revenue of $1.875 billion-$1.930 billion and non-GAAP EPS of $11.13-$11.49. At $218.09, the shares were below both the 50-day SMA of $220.98 and 200-day SMA of $247.53, but the consensus target of $291.86 and a recovering Healthcare segment create a constructive valuation and catalyst setup.