OraSure Technologies Stock Appears To Be Fairly Valued

GuruFocus.com
·4 min read

- By GF Value

The stock of OraSure Technologies (NAS:OSUR, 30-year Financials) shows every sign of being fairly valued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $11.68 per share and the market cap of $840.3 million, OraSure Technologies stock gives every indication of being fairly valued. GF Value for OraSure Technologies is shown in the chart below.


OraSure Technologies Stock Appears To Be Fairly Valued
OraSure Technologies Stock Appears To Be Fairly Valued

Because OraSure Technologies is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.

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Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. OraSure Technologies has a cash-to-debt ratio of 34.17, which which ranks better than 78% of the companies in the industry of Medical Devices & Instruments. The overall financial strength of OraSure Technologies is 7 out of 10, which indicates that the financial strength of OraSure Technologies is fair. This is the debt and cash of OraSure Technologies over the past years:

OraSure Technologies Stock Appears To Be Fairly Valued
OraSure Technologies Stock Appears To Be Fairly Valued

It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low profit margins. OraSure Technologies has been profitable 5 over the past 10 years. Over the past twelve months, the company had a revenue of $171.7 million and loss of $0.24 a share. Its operating margin is -3.65%, which ranks in the middle range of the companies in the industry of Medical Devices & Instruments. Overall, the profitability of OraSure Technologies is ranked 4 out of 10, which indicates poor profitability. This is the revenue and net income of OraSure Technologies over the past years:

OraSure Technologies Stock Appears To Be Fairly Valued
OraSure Technologies Stock Appears To Be Fairly Valued

Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term stock performance of a company. A faster growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of OraSure Technologies is -2.4%, which ranks worse than 67% of the companies in the industry of Medical Devices & Instruments. The 3-year average EBITDA growth rate is -55%, which ranks in the bottom 10% of the companies in the industry of Medical Devices & Instruments.

Another way to look at the profitability of a company is to compare its return on invested capital and the weighted cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. We want to have the return on invested capital higher than the weighted cost of capital. For the past 12 months, OraSure Technologies's return on invested capital is -16.08, and its cost of capital is -1.09. The historical ROIC vs WACC comparison of OraSure Technologies is shown below:

OraSure Technologies Stock Appears To Be Fairly Valued
OraSure Technologies Stock Appears To Be Fairly Valued

In conclusion, the stock of OraSure Technologies (NAS:OSUR, 30-year Financials) gives every indication of being fairly valued. The company's financial condition is fair and its profitability is poor. Its growth ranks in the bottom 10% of the companies in the industry of Medical Devices & Instruments. To learn more about OraSure Technologies stock, you can check out its 30-year Financials here.

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This article first appeared on GuruFocus.