OSI Systems Wins More Cargo Inspection Orders (OSIS)

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OSI Systems Inc. (NASDAQ:OSIS) announced this morning that it won two separate government contracts worth roughly a combined $30 million.  These are cargo screening orders for Rapiscan Eagle Mobile, Rapiscan Eagle Gantry and Rapiscan Gamma Radiographic Detection Systems Gantry systems.  The systems are to be deployed domestically and internationally for the inspection of inbound and outbound shipping containers and trucks.

OSI Systems generated $532.28 million in fiscal JUNE-2007 revenues, so this is representative of more than 5% of revenues.  The few analysts that follow the stock are expecting the fiscal JUNE-2008 revenues to be $590 million.

What is sad is that if you go back through time the company has grown revenues from 2005 to 2006 to 2007 from $385M to $$452.6M to $532M (and projected to $590M in 2008).  But this stock has never really made a major ramp as shares closed yesterday at $23.50 and have traded over the last year at $18.53 to $29.80.  At the June 30 equivalent for 2005, 2006, and 2007, the stock prices were as follows:  $15.79, $17.77, and $27.35 respectively. The current stock price reflects a post-earnings near 20% haircut, although shares have regained much of the losses.

For such a strong homeland security play in an area that actually NEEDS to be improved exponentially compared to so many other wasted spending projects in the homeland sector, this stock has never really managed to break out.  If anyone ever gets tough or serious on port container and cargo security, this is one to watch.  AND, if the government ever looks like they are going to get serious about this initiative then OSI Systems could find itself acquired by larger companies.  If the government continues to putter around this topic, well shares are representative of that currently.

Jon C. Ogg
October 3, 2007