Omnicell (OMCL) Rides On Acquisitions Amid Tough Competition

On Jul 4, we issued an updated research report on Mountain View, CA-based Omnicell Inc. (NASDAQ:OMCL) . The company develops and markets end-to-end automation solutions for the medication-use process. The stock currently has a Zacks Rank #3 (Hold).

We are encouraged by the company’s recently formed partnership with CompleteRx, a pharmacy management company, to provide a comprehensive medication distribution and management solution to the Commonwealth of Massachusetts State Office of Pharmacy Services (SOPS).

Also, Omnicell is progressing with its three-legged strategy that covers market expansion through delivery of differentiated, innovative solutions; expansion into new markets, primarily outside the U.S.; and expansion through strategic partnerships and acquisition of new technologies.

Furthermore, being part of Omnicell’s three-pronged strategy, the recently completed Aesynt acquisition has started to broaden its portfolio for point of care and centralized medication management equipment and solutions.

Omnicell’s aim to derive a significant portion of its revenues from international operations over the long haul is encouraging. To achieve this, the company plans to expand its international footprint through various strategies. Omnicell has established a footprint in Sweden, Germany, U.K., Singapore, Middle East, South Africa and China where pipeline development is strong.

On the flip side, Omnicell faces intense competition in the medication management and supply chain solutions market. Also, Omnicell has adopted several strategies to drive its top line including portfolio expansion, acquisitions and further penetration into the medication adherence market. Thus, the company continues to battle escalating costs. The company’s lowered adjusted revenue and adjusted earnings guidance for full-year 2017 is also disappointing.

For the majority of the last three months, Omnicell has been trading below the Zacks categorized Medical Info Systems industry. As per the latest share price movement, the stock has gained 4.5%, significantly lower than the broader industry’s addition of 11.4%.

Further, over the last three months, a comparative analysis of Omnicell's forward P/E (F12M basis) multiple reflects a gloomy picture that might be a cause for investor concern. The company currently trades at a P/E ratio of 55.83, overvalued when compared to 54.81 of the industry.

Key Picks

A few better-ranked medical stocks are Mesa Laboratories, Inc. (NASDAQ:MLAB) , Inogen, Inc. (NASDAQ:INGN) and Align Technology, Inc. (NASDAQ:ALGN) . Notably, Mesa Laboratories and Inogen sport a Zacks Rank #1 (Strong Buy), while Align Technology carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Mesa Laboratories has a positive earnings surprise of 2.84% for the last four quarters. The stock has added roughly 15.5% over the last three months.

Inogen has a long-term expected earnings growth rate of 17.5%. The stock has gained around 25.4% over the last three months.

Align Technology has an expected long-term adjusted earnings growth of almost 24.1%. The stock has added roughly 29.8% over the last three months.

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