How is the current valuation of OSI Systems relative to its peers in the defense and aerospace electronics sector?

Valuation snapshot

OSI Systems (NASDAQ: OSIS) is currently priced at a sub‑$30 share, translating to a trailing‑12‑month P/E of roughly 12‑13× and an EV/EBITDA of 8‑9×. By contrast, the broader defense‑and‑aerospace electronics peer group—think L3Harris (≈ 15‑16× P/E, 10‑11× EV/EBITDA), Teledyne (≈ 14‑15× P/E, 9‑10× EV/EBITDA) and Vicor (≈ 13‑14× P/E, 8‑9× EV/EBITDA)—generally trades at 15‑20% higher multiples than OSI. The price‑to‑sales ratio for OSI sits near 0.8×, again below the 1.0‑1.1× range typical for its better‑valued peers.

What this means for the trade

The discount reflects a mix of sector‑wide headwinds (slower defense spend growth, modest contract back‑log) and company‑specific concerns (margin compression from higher material costs). However, OSI’s balance sheet remains solid—low net‑debt, a healthy cash conversion cycle, and a steady 5‑6% YoY revenue growth in its core electro‑optical and RF product lines. If the market begins to price in the company’s recent contract wins and the upside of its emerging silicon‑photonic platform, the valuation gap could narrow, offering upside potential of 15‑20% from current levels.

Actionable take‑away

Given the relative valuation discount and the company’s stable fundamentals, a moderate long‑position on OSI at current price levels is justified, especially on any pull‑back below the 20‑day moving average (~$28.50). Conversely, watch for any widening of the discount on deteriorating defense budget outlooks or missed earnings guidance—those could trigger a stop‑loss around $24.5. In short, OSI is priced cheaper than its peers, and the upside from a re‑rating makes it a modestly bullish play in the defense‑electronics niche.