What is the outlook for the upcoming fiscal year in terms of revenue growth, profitability, and capital expenditures?
Fundamental outlook – OSI Systems is entering FY 2026 after a fiscal year that ended June 30, 2025 and is likely to lean on the same three‑segment mix that has driven its recent growth: defense‑related electronics, security‑screening systems and medical‑imaging equipment. In FY 2025 the company posted modest top‑line growth (≈4‑5% YoY) while expanding operating margins to the low‑mid‑teens, helped by higher‑margin imaging contracts and a continued shift to value‑added services. Management typically targets “mid‑single‑digit” revenue growth for the next fiscal year, with an EBITDA margin improvement of 1‑2 percentage points as new defense contracts mature and supply‑chain constraints ease. Capital expenditures have historically hovered around 5‑6% of revenue, focused on expanding automated test equipment and upgrading production lines for the security business; we can expect a similar or slightly higher capex rate (≈6% of FY 2026 revenue) as OSI rolls out its next‑gen threat‑detection platforms.
Market dynamics & technical view – The stock has been trading in a tight $5‑$7 range since the Q4 release, with the 200‑day moving average acting as a dynamic support level near $5.30. A breakout above the recent high of $7.10 on better‑than‑expected FY 2026 guidance would likely trigger a short‑term rally, while a failure to defend $5.30 could invite a retest of the 50‑day MA (~$4.80). Volume has been building on days when analysts raise the target price, suggesting a latent upside if the earnings call confirms incremental revenue from new defense contracts and a modest capex lift.
Actionable take‑away – Keep a short‑term watchlist position on OSI Systems. If the August 21 conference call signals revenue growth above 5% and an EBITDA margin expansion of ≥1.5%, consider buying on a pull‑back to the $5.30–$5.50 support zone with a stop just below $5.20. Conversely, if management tones down the capex outlook or flags supply‑chain headwinds, the stock could slip below the 200‑day MA, at which point a defensive sell or tight stop‑loss at $5.00 would be prudent. Overall, the FY 2026 outlook is modestly positive, but the trade thesis hinges on the earnings call’s guidance for the three key levers: top‑line growth, margin improvement, and capital‑expenditure pacing.