This has been a pretty tough earnings season for a lot of companies, and the one before that was no walk in the park either. Stocks are getting punished with even the slightest misses or guidance reductions.
Just take a look at Yelp Inc (NYSE:YELP) and LinkedIn Corp (NYSE:LNKD). YELP missed earnings last week, and Yelp stock fell nearly 25% following three analysts’ downgrades; LNKD actually beat on earnings but cut its forecast for the year and fell 21%.
The question is whether these moves are buying opportunities or danger signals.
One company that I like went through a similar stretch recently (although it did bump up briefly after reporting earnings before fading a bit), and since the report was strong, I continue to like it — especially in the current environment.
Omnicell, Inc. (NASDAQ:OMCL) has been on my GameChangers Buy List since November and has already returned some solid profits, but I believe there is still plenty of upside potential left. In fact, I recently raised my buy limit to make sure every one of my subscribers has the chance to profit from this growing healthcare company.
Omnicell is a technology-based healthcare company dedicated to patient safety. OMCL is the leading provider of technologically advanced automation that helps healthcare facilities (like hospitals and pharmacies) streamline how medications are administered and manage costly medical supplies.
In short, the Omnicell looks to reduce human error by creating products that ensure clinicians give the right medication to the right patient with the right dosage at the right time. Through its automation, analytics and medication adherence solutions, OMCL also reduces operating costs, improves workflow and increases efficiency.
Omnicell has enjoyed solid growth in recent years, with revenues increasing from $213 million in 2009 to $381 million in 2013. Earnings over the same period grew significantly from 10 cents per share to an adjusted $1.08 per share.
In addition to increased demand from the benefits of automating medication administration (a natural industry growth), management attributes this success to broadening OMCL’s product portfolio, expanding its markets geographically and forming partnerships with customers to address medication management through the entire continuum of care.
Results remained strong in 2014 thanks in part to Omnicell’s robust pipeline and an increase in demand for both its automation and medical adherence solutions, and OMCL’s success continued into the first quarter of this year. OMCL earned 29 cents per share, nicely beating expectations by 6 cents.
Revenues were also strong, increasing 14% versus the expected 10% increase. OMCL management reiterated its existing 2015 earnings guidance of $1.31-$1.36, and Omnicell also reported a large number of competitive wins and the highest amount of customers in OMCL’s history.
Omnicell stock hit a new 52-week high the following day but has since pulled back, and I see this as a buying opportunity. At a time when so many healthcare companies are disappointing, OMCL is headed in the right direction.
Plus, trading at 22 time 2016 earnings estimates of $1.57 a share, Omnicell still has less risk than most — something to consider in the current environment — and should continue to outperform once the market stabilizes.
Hilary Kramer is the editor of GameChangers and Breakout Stocks Under $10.
